Will H-P be the Turnaround Story of 2013?

With shares of Hewlett-Packard (NYSE:HPQ) trading at around $13.68, is Hewlett-Packard an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Hewlett-Packard has had a disastrous few years. We have seen sluggish PC sales, flat revenue, declining profits, increased debt, and exposure in Europe (not a positive at the moment.) That’s not all. Those are only the negatives you could see from a company facing normal challenges. In the case of Hewlett-Packard, the situation goes well beyond normal. Obviously, acquisitions haven’t panned out, which is an understatement. Palm and Compaq were flops, but Autonomy brings it to another level. Who was responsible for accounting fraud? Does it matter? It led to an $8 billion writedown. This story is far from over, and it can end up having a major impact on Hewlett-Packard one way or another. It will be interesting to see how it all plays out. Get your popcorn ready.

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On the positive side – yes, there is actually a positive side – it has been rumored that Carl Icahn might take a stake in the company. You never know with Mr. Icahn, but don’t get too excited. These rumors started on Twitter, which is a great site, but it shouldn’t be used as a go-to source for information about billionaire investors and their next moves. A real positive is that IT and cloud computing are showing good margins. Perhaps Hewlett-Packard should move more in that direction. Another potential positive is CEO Meg Whitman, who had enormous success at eBay (NASDAQ:EBAY).

That’s a lot of drama. It’s not often that numbers relax people, but this could be one of those few situations. Let’s take a look at some important numbers.