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HP (HPQ): analysis traps
Where its figures could mislead a reader, and what to check before taking them at face value · Data: Q3 FY26, to Jul 31, 2026, filed Aug 27, 2026; rules v1.1
HP (HPQ): 2 rules of 10 triggered on the filings to Jul 31, 2026: receivables growing = future cash is certain; adjusted profit = economic profit. 1 to review; 2 not applicable. Each is a question to verify, with the normal explanation that would produce the same figures.
Check these first
Receivables growing = future cash is certain Triggered · severity medium · confidence medium
Receivables grew 40% year over year in Q3 FY26 against revenue growth of 13%, and the quarter before 41% against 9%; days sales outstanding is 39 against a median of 32 over the eight quarters before. More of each quarter's revenue is still owed by customers.
Innocent reading: Seasonality: a quarter that always ends with big shipments.
Adjusted profit = economic profit Triggered · severity medium · confidence low
Adjusted EPS was at least 10% above GAAP in 3 of the last 3 quarters (on average 29% above). Costs excluded every quarter (restructuring, stock compensation, amortisation of acquired intangibles, litigation) are a recurring cost of the business, not a one-off.
Innocent reading: A genuine one-off this year (an impairment, a settlement) that happens to span several quarters.
A precise DCF value = the true value To review · confidence high
The DCF's point value is 45.26 a share (price 28.46); 74% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from 16.50 to 74.01; across every method the research ran the range is -70 to 431. The value is a range; the decimals are not information.
Innocent reading: A stable, mature business with a narrow range of outcomes, where the point value is a fair summary.
Every rule
A01 FCF growth = the business improved Not triggered confidence high
Free cash flow did not rise ($3.2B → $2.8B): the trap does not arise.
The figures and how they are read
| Fiscal year before | FY24 |
| Fiscal year | FY25 |
| Operating cash flow, year before | $3.7B |
| Operating cash flow | $3.7B |
| Capex, year before | $592M |
| Capex | $897M |
| Free cash flow, year before | $3.2B |
| Free cash flow | $2.8B |
| Change in FCF | −$357M |
| Change in capex | $305M |
| Working capital: change in its cash contribution | −$308M |
FCF = operating cash flow − cash capex; ΔFCF = ΔOCF − ΔCapEx; the working-capital part is the change in the cash-bridge items (receivables, inventory, payables, accruals), with the sign of the cash flow statement
Source: FY25 (cash flow statement, fiscal year) · FY24 (cash flow statement, fiscal year before)
A07 Stock compensation added back = no economic cost Not triggered confidence high
Stock compensation is 0.9% of revenue: small enough that adding it back changes little.
The figures and how they are read
| Fiscal year | FY25 |
| Stock compensation | $522M |
| Revenue | $55.3B |
| SBC / revenue | +0.9% |
| Buybacks | $850M |
| Buybacks / SBC | 1.6 |
| Diluted shares, year before | 989.0M shares |
| Diluted shares | 953.0M shares |
| Diluted shares: change | -3.6% |
SBC / revenue from the cash flow statement's add-back; the diluted weighted share count year over year; buybacks from the financing section
Source: FY25 (stock compensation, buybacks and the diluted share count, fiscal year)
B02 Receivables growing = future cash is certain Triggered severity medium · confidence medium
Receivables grew 40% year over year in Q3 FY26 against revenue growth of 13%, and the quarter before 41% against 9%; days sales outstanding is 39 against a median of 32 over the eight quarters before. More of each quarter's revenue is still owed by customers.
The figures and how they are read
| Quarter | Q3 FY26 |
| Revenue, year over year | +12.5% |
| Receivables, year over year | +39.9% |
| Quarter before | Q2 FY26 |
| Revenue y/y, quarter before | +9.0% |
| Receivables y/y, quarter before | +41.3% |
| Days sales outstanding | 39.0 |
| DSO, median of eight quarters | 32.0 |
| Receivables | $7.2B |
| Revenue | $15.7B |
receivables and revenue against the same quarter a year earlier; DSO = receivables / quarterly revenue × days, against the median of the eight quarters before
Source: Q3 FY26 (receivables and revenue) · Q3 FY25 (the same quarter a year earlier)
What would explain it innocently
- Seasonality: a quarter that always ends with big shipments
- An acquisition brought its own receivables
- New business with longer standard terms (government, large enterprise)
- Currency: receivables booked in a strengthening currency
What to look for in the filing
- The receivables ageing and the allowance for credit losses
- Any factoring or receivables sold (and whether with recourse)
- Credit terms by customer group
What would show the trap does not apply
- Receivables fall back in line with revenue in the next quarter and DSO returns to its history
- The 10-Q attributes the increase to a disclosed one-off (a large customer's timing, an acquisition) and the allowance for doubtful accounts did not rise
Look again: next filing.
B08 Adjusted profit = economic profit Triggered severity medium · confidence low
Adjusted EPS was at least 10% above GAAP in 3 of the last 3 quarters (on average 29% above). Costs excluded every quarter (restructuring, stock compensation, amortisation of acquired intangibles, litigation) are a recurring cost of the business, not a one-off.
The figures and how they are read
| Quarter / adjusted EPS / GAAP EPS / gap | 2026-01-31 / 0.81 / 0.58 / 0.284; 2026-04-30 / 0.86 / 0.49 / 0.43; 2026-07-31 / 0.83 / 0.71 / 0.145 |
| Quarters with adjusted ≥ 10% above GAAP | 3 |
| Quarters compared | 3 |
| Latest gap | +14.5% |
the analysts' 'actual' (usually the company's adjusted EPS) against GAAP net income ÷ diluted shares for the matching quarter; a gap of 10% or more counts (the stand-in until three releases' reconciliation tables are on file)
Source: 2026-01-31 (adjusted 0.81 vs GAAP 0.58) · 2026-04-30 (adjusted 0.86 vs GAAP 0.49) · 2026-07-31 (adjusted 0.83 vs GAAP 0.71)
What would explain it innocently
- A genuine one-off this year (an impairment, a settlement) that happens to span several quarters
- Amortisation of acquired intangibles, which many investors also exclude by choice
- The analysts' 'actual' is not the company's own adjusted figure
What to look for in the filing
- The reconciliation table in the earnings release: which items, how much, how often
- Whether the same items were excluded in earlier years
What would show the trap does not apply
- The reconciliation shows the excluded items ending (a restructuring with its final charge, a settlement paid) and the gap to GAAP closes in the next quarters
- The excluded items are only amortisation of acquired intangibles and the cash paid for the deals is in the investing cash flow
Look again: next filing.
C02 Low net debt = no refinancing risk Not triggered confidence medium
$847M comes due within a year, 9.5× covered by cash and investments of $4.2B plus $3.9B of free cash flow.
The figures and how they are read
| Cash and investments | $4.2B |
| Debt | $9.7B |
| Net debt | $5.6B |
| Due within a year | $847M |
| Read from | the debt maturity table |
| Free cash flow, twelve months | $3.9B |
| Cash plus free cash flow | $8.1B |
| Coverage of what is due | 9.5 |
| Due in the second year | $1.2B |
| Balance sheet date | 2026-07-31 |
due within a year from the maturity table (else the current portion of debt), against cash and investments plus free cash flow over the last twelve months (zero if negative); no credit lines assumed
Source: FY25 (debt maturities, cash and investments)
D03 EPS growth = profit growth Not triggered confidence high
EPS fell 11% and net income fell 13% in Q3 FY26; the share count fell 2.8%: EPS growth follows profit growth.
The figures and how they are read
| Quarter | Q3 FY26 |
| Quarter before | Q3 FY25 |
| EPS, year before | $0.80 |
| EPS | $0.71 |
| Net income, year before | $763M |
| Net income | $661M |
| Diluted shares, year before | 954.0M shares |
| Diluted shares | 927.0M shares |
| EPS growth | -10.9% |
| Net income growth | -13.4% |
| Diluted shares: change | -2.8% |
| eps from profit | -$0.11 |
| eps from share count | $0.02 |
EPS and net income against the same quarter a year earlier; the EPS bridge attributes the change to profit first, then to the share count (the order is fixed and disclosed)
Source: Q3 FY26 (net income, diluted shares, EPS) · Q3 FY25 (the same quarter a year earlier)
E02 Low P/E at a cyclical peak = undervalued Not triggered confidence medium
Net income of $2.5B is not at a cyclical high against the last eight years (median $3.2B, best $6.5B): the P/E of 10.8× is on a normal year.
The figures and how they are read
| market value | $26.4B |
| net income ttm | $2.5B |
| pe ttm | 10.80 |
| net income median fy | $3.2B |
| pe mid cycle | 8.20 |
| net income peak fy | $6.5B |
| years | FY18 / 5327.0; FY19 / 3152.0; FY20 / 2844.0; FY21 / 6503.0; FY22 / 3203.0; FY23 / 3263.0; FY24 / 2775.0; FY25 / 2529.0 |
| down years in window | 5 |
P/E on the trailing twelve months' net income against the P/E on the median net income of the last eight fiscal years (a mid-cycle stand-in); 'at a peak' = this year's profit at or above 90% of the best year and at least 1.3× the median
Source: Q3 FY26 (net income, trailing twelve months)
E07 A precise DCF value = the true value To review confidence high
The DCF's point value is 45.26 a share (price 28.46); 74% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from 16.50 to 74.01; across every method the research ran the range is -70 to 431. The value is a range; the decimals are not information.
The figures and how they are read
| dcf value | 45.26 |
| price | 28.46 |
| terminal value share | +74.0% |
| swing by input | Operating margin / ±3 pts / 16.5 / 74.01; Revenue growth (each year) / ±5 pts / 36.57 / 55.62; WACC / ±1 pt / 38.39 / 54.61; Capex (share of revenue) / ±1 pt / 42.27 / 48.25 |
| range all methods | -69.87; 430.6 |
the DCF's point value against the share of it that is the terminal value and the value at each input moved by one step (growth ±5 pts, WACC ±1 pt, margin ±3 pts …); the range across every method the research ran
Source: 2026-11-08 (valuation research)
What would explain it innocently
- A stable, mature business with a narrow range of outcomes, where the point value is a fair summary
- The inputs that matter most are themselves well known (a regulated return, a long contract)
What to look for in the filing
- Which input you believe differs from the research's and why
- What the price implies for growth (the reverse DCF on the fair-value page)
What would show the trap does not apply
- The DCF's value is robust to the terminal growth and discount rate (the range's low end is still above the price)
- The company's cash flows over the next three years track the DCF's early years
Look again: next filing.
J06 A bank's low P/E and high profit = safe Not applicable
not a bank
J08 A REIT's low net income = the dividend is unsafe Not applicable
not a REIT
What the statuses mean
Triggered: the filings show the pattern; read the normal explanations and the missing evidence before concluding anything. To review: one quarter or a weak signal; a reader's judgement, not a pattern. Not triggered: the pattern is absent on these figures. Insufficient data: the filings read so far do not hold what the rule needs; this is not a clean bill. Not applicable: the rule is not meant for this kind of company (a bank's working capital, a loss-making quarter's EPS growth). Out of date: the latest filing is more than fifteen months old.
Severity is what the pattern could mean for cash, value or solvency; confidence is how reliable the inputs and the reading are. The two are kept apart.
Record a view
A reader's judgement, grounds, what would change it and the next review; kept in the browser (needs JavaScript).
Every rule and the companies it triggers on → HP: cash flow → Earnings quality score →
Each rule reads the company's own filings by a fixed formula and says what would explain the same figures innocently. A triggered rule is a question to verify, not a finding of manipulation, and not a view on the stock. Missing data is shown as missing, never as clear. Not investment advice.