HP stock has gained 27.4% year to date, and both its intrinsic value estimate using a Discounted Cash Flow (DCF) approach and its market multiples currently point to the shares trading at a discount to what the underlying cash flows may justify.

• Year to date, HP is up 27.4%, which puts the recent share price strength against a backdrop of valuation indicators that still suggest upside relative to intrinsic value.
• Momentum around HP's AI focused PC shipments can support expectations for future cash flows, while pressure on input costs and margins may limit how much value ultimately reaches shareholders.
• On Simply Wall St's broader checks, HP screens as undervalued in 5 of 6 areas, which means the valuation work leans toward the stock being cheap on several metrics 5.

The issue now is whether HP's recent rally has already captured most of that apparent discount, or if the current price still leaves room compared with its intrinsic value estimate.

Does HP Look Undervalued on Cash Flow?

The Discounted Cash Flow (DCF) model here uses a 2 Stage Free Cash Flow to Equity approach to estimate what HP might be worth based on its future cash generation. HP generated about $3.84b in free cash flow over the last twelve months, and the forecast path used in this model assumes cash flows that broadly hold in a steady to slightly declining range over time rather than rapid expansion.

On those assumptions, the model points to an intrinsic value of about $43.57 per share. Compared with the current share price, this implies the stock trades at roughly a 35.3% discount and appears undervalued on cash flows alone. HP's raised full year 2026 earnings guidance and growing mix of AI PCs are among the factors used in the model, which incorporates the view that current cash flows are sustainable.

Overall, the DCF work indicates that HP currently screens as undervalued relative to the cash it is expected to produce for shareholders.

Our Discounted Cash Flow (DCF) analysis suggests HP is undervalued by 35.3%. Track this in your watchlist or portfolio, or discover 49 more high quality undervalued stocks.

Is HP Still Cheap on Earnings?

P/E suits HP because earnings remain a key reference point for how investors value a mature hardware and services business. HP currently trades on a P/E of about 10.1x, which is well below the broader tech industry average of roughly 22.8x and also below peers on about 55.3x. This indicates that the market is pricing HP at a lower earnings multiple than many other tech stocks.

Simply Wall St's fair P/E ratio for HP is about 24.4x. This figure reflects what investors might usually pay for a company with HP's size, margins and risk profile. The current P/E of 10.1x sits materially under that fair ratio, which indicates the stock is priced below this earnings-based reference point even after the recent share price strength.

On the P/E multiple alone, HP stock appears priced below what investors have been willing to pay for similar earnings.

The HP Narrative: What Would Justify Today's Price?

Simply Wall St Narratives for HP pick up where the valuation work leaves off. They set out clear scenarios that would make HP's stock worth materially more or less than today’s price, based on different paths for growth, margins and earnings, and you can find them on the Community page. Each narrative links its number to a specific view on how HP's growth, profitability and risks might evolve, which you can revisit as fresh information becomes available.

Community views on HP pull in very different directions, with one side focused on AI led upside and the other on margin risk from costs and competition.

Bull case: roughly fairly valued

"HP's acquisition of Humane and integration of their AI-powered platform CosmOS is expected to accelerate the development of an intelligent ecosystem across HP's devices..."

Bear case: 57% overvalued

"With rising commodity costs negatively impacting gross margins and the time required for cost reduction and pricing actions to fully offset these headwinds, there is a risk to achieving anticipated net earnings improvements..."

Do you think there's more to the story for HP? Head over to our Community to see what others are saying!

The Bottom Line

HP looks undervalued on both the Discounted Cash Flow (DCF) intrinsic value estimate and on earnings based multiples, which keeps the valuation case aligned rather than conflicted. The key question is whether cash flows from AI focused PCs and the broader business can hold up well enough for that intrinsic value to be realised, given ongoing cost and margin pressures. For investors, the crux is whether the current discount reflects an opportunity or a warning that profitability and competitive risks may cap how much of that value ultimately shows up in shareholder returns.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.