Reviewing HP (HPQ) and Apple (AAPL)

HP (NYSE: HPQ) and Apple (NASDAQ:AAPL) are both large-cap computer and technology companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, profitability, earnings, analyst recommendations, institutional ownership, risk and valuation.

Profitability

This table compares HP and Apple’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
HP 4.66% -64.93% 9.10%
Apple 21.09% 36.29% 13.95%

Dividends

HP pays an annual dividend of $0.53 per share and has a dividend yield of 2.5%. Apple pays an annual dividend of $2.52 per share and has a dividend yield of 1.4%. HP pays out 38.4% of its earnings in the form of a dividend. Apple pays out 27.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Apple has raised its dividend for 4 consecutive years.

Valuation and Earnings

This table compares HP and Apple’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
HP $48.24 billion 0.74 $2.50 billion $1.38 15.38
Apple $229.23 billion 3.91 $48.35 billion $9.20 18.99

Apple has higher revenue and earnings than HP. HP is trading at a lower price-to-earnings ratio than Apple, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

HP has a beta of 1.85, indicating that its share price is 85% more volatile than the S&P 500. Comparatively, Apple has a beta of 1.23, indicating that its share price is 23% more volatile than the S&P 500.

Insider and Institutional Ownership

79.4% of HP shares are owned by institutional investors. Comparatively, 60.3% of Apple shares are owned by institutional investors. 0.6% of HP shares are owned by insiders. Comparatively, 0.1% of Apple shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of recent recommendations for HP and Apple, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
HP 0 8 13 0 2.62
Apple 0 6 42 0 2.88

HP currently has a consensus target price of $21.58, suggesting a potential upside of 1.63%. Apple has a consensus target price of $200.28, suggesting a potential upside of 14.66%. Given Apple’s stronger consensus rating and higher possible upside, analysts plainly believe Apple is more favorable than HP.

Summary

Apple beats HP on 13 of the 17 factors compared between the two stocks.

HP Company Profile

HP Inc. is a provider of products, technologies, software, solutions and services to individual consumers, small- and medium-sized businesses, and enterprises, including customers in the government, health and education sectors. The Company provides personal computing and other access devices, imaging and printing products, and related technologies, solutions and services. Its segments include Personal Systems, Printing and Corporate Investments. The Personal Systems segment provides Commercial personal computers (PCs), Consumer PCs, workstations, thin clients, Commercial tablets and mobility devices, retail point-of-sale systems, displays and other accessories, software, support and services for the commercial and consumer markets. The Printing segment provides consumer and commercial printer hardware, supplies, media, solutions and services, as well as scanning devices. The Corporate Investments segment includes the operations of HP Labs and certain business incubation projects.

Apple Company Profile

Apple Inc. (Apple) designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications. The Company’s products and services include iPhone, iPad, Mac, iPod, Apple TV, a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud, and a variety of accessory, service and support offerings. The Company also delivers digital content and applications through the iTunes Store, App StoreSM, iBookstoreSM, and Mac App Store. The Company distributes its products worldwide through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers. In February 2012, the Company acquired app-search engine Chomp.

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