Hewlett-Packard Company (HPQ) currently trades at 4.5 times cash flow and is set to benefit from a turnaround in the PC, enterprise server and printer markets and rebound to a more historic valuation, says David Steinberg, Managing Partner and Founder of DLS Capital Management LLC.
“[HPQ] trades 4.5 times cash flow. You’ve got a great new manager, Meg Whitman, running that business, who should be able to do some basic blocking and tackling. And you should be able to see that business rebound to a more historic valuation level. Even at a big discount, let’s say a six enterprise value to cash flow multiple, which is not even high for its history,” Steinberg said.
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Steinberg says that even though PC demand is going down, the enterprise software and computer equipment markets are still rising, and HPQ is still a solid player in this arena and is already seeing its stock rebound.
“Everybody thinks PCs are dead and so forth, and their demand is certainly going to go down, but enterprise software or enterprise computer equipment is still rising. As well, they still have a great solid printer business. So you have patents, you have all sorts of great things, but the company had been abandoned by its institutional shareholders and dropped to $12 per share. It’s already begun to rebound to $20, but it had been $50 just a couple of years ago,” Steinberg said.
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