With the information contained in the annual report, it could be easier for an investor to make sure that they consider all the essential risk factors and financial performance indicators prior to making any specific decisions. The two primary risk factors that currently affect HP are the Covid-19 pandemic and a heavy reliance on third-party suppliers (HP Inc., 2022). For an investor, risk-related information is going to play an important role due to the changes that are going to affect (a) supply chain operations and (b) materials and products delivery, respectively.
Statement on Financial Position
Compared to 2020, HP saw total net revenue grow by 12.1% due to increased sales of laptops and supplies. In the 10K Form presented by HP Inc. (2022), it can be found that the gross margin increased by 2.7% as well, being driven by favorable foreign currency impacts and numerous HP employees working from home. The company’s profit margin percentage is equal to 10.24% ($6,503 million profit; $63,487 million total revenue). Based on the current state of affairs in the market, this 10% margin can be considered exceptionally healthy, as smaller companies cannot be expected to perform as nicely during the pandemic. A reasonable debt financing source could be angel investors due to their extensive reach in the market and valuable connections with other stakeholders (Di Pietro, 2021). On the other hand, it could be harder for HP to attain referrals from angel investors and maintain a healthy relationship with them. One possible equity financing source could be stock funding, due to the ability to stay ahead of inflation and increased incomes from dividends and price appreciation (Singh, 2021). Nevertheless, HP could risk losing all of its sourcing and exposing itself to compete against professional and institutional investors.
Stock
As it is evident from Figure 1, the stock price for HP Inc. started increasing in December 2021. The two main reasons that contributed to the increase were (a) a strong PC market presence and (b) a much more stable operating margin. Those reasons resulted from the pandemic and the need to provide workers from all over the world with reliable hardware.
References
Di Pietro, F. (2021). The rationale for listing on equity crowdfunding: Actual and expected benefits for companies. Journal of Industrial and Business Economics, 48(4), 527-549.
Google Inc. (2022). HP Inc. stock price. google.com.
HP Inc. (2022). Form 10K [PDF]. United States Securities and Exchange Commission.
Singh, A. (2021). Investigating the dynamic relationship between litigation funding, gold, bitcoin and the stock market: The case of Australia. Economic Modelling, 97, 45-57.