Hewlett-Packard Company (HPQ), Best Buy Co., Inc. (BBY), Staples, Inc. (SPLS): Can These Stocks Continue Their Run?

In order for these turnaround efforts to continue, putting and end to the operating margin and revenue declines experienced in fiscal year 2012 is key. The company is focusing on cost reduction initiatives expected to last until 2014 along with increasing R&D and IT expenditures to become more competitive.

Cash on Hewlett-Packard Company (NYSE:HPQ)’s books has increased to $12.59 billion as of January 2013. Shareholders’ Equity has also increased to $23.29 billion. Hewlett-Packard Company (NYSE:HPQ) also increased its dividend in 2012. These factors prove to me that the company is earning solid money and strengthening its financial position. Based on the share price as of this writing, it is near a 52-week high. Some of the turnaround has already been priced in, though if it continues, I predict that there is still a lot of room for the shares to run.

Best Buy and Staples – Areas of success

Based on the 10-K filed for Best Buy for the most recent fiscal year ending in January of 2013, some key measures of strength are noticeable. Operating cash flow was $1.4 billion, with capital expenditures coming in at $705 million. This produced strong free cash flow. Cash on the balance sheet increased to $1.8 billion from $1.2 billion in January of 2012 as a result of this. Its net loss decreased by over 50% compared to January of 2012, and this net loss was due to goodwill impairments which is a non-cash expense.

While some big box retail stores of Best Buy Co., Inc. (NYSE:BBY) have been closed, its Mobile stand-alone stores are growing in number. It had 409 of these stores as of January 2013, compared to 305 a year before that. Computing and mobile phones made up the largest percentage of its revenue mix, and that grew by 10% in 2013 to 44% of total revenue.

While sales decreased for Staples, Inc. (NASDAQ:SPLS) in the first quarter ending in March of 2013 compared to the same period a year before, there were some strong areas of strength. Based on the 10-Q filed, cash flow provided by operations jumped to $348 million from $147 million a year ago. North American commercial sales were a bright spot as those sales increased 1.7% in March of 2013 compared to March of 2012. International sales declined 12.5% though, and this is an area that needs to improve as it would greatly help the company meet or exceed its earnings targets.

Staples, Inc. (NASDAQ:SPLS) is continuing to buy back shares through 2013, and as a result, this and the dividend are two large uses of its strong positive cash flows. These are great things that provide strong value to shareholders as I feel the shares are still undervalued. Management obviously agrees.

Conclusion

I like all three of these stocks for the long run, though at current price levels my view of them has been adjusted accordingly.

I was a shareholder in Best Buy Co., Inc. (NYSE:BBY) and Hewlett-Packard Company (NYSE:HPQ) but sold my positions to take profits once the shares increased as fast as they did from where I bought them. I like Best Buy at $20 per share and Hewlett-Packard at $18 a share for long-term entry points. The strong Internet presence that Best Buy has and the solid earnings that Hewlett-Packard produces are the things I like about those two stocks.

I own Staples, Inc. (NASDAQ:SPLS) here and have made a decision to hold on to my shares even though the recent increases in price have made it a more difficult decision. I feel the shares are in a range that can easily be broken to the upside if the company can grow its sales. As it is, the company was mentioned to be a takeover target of Bain Capital and has been noted to be appealing for the value it provides. I like it here at current price levels, and this would be a stock I would still buy here.

The article Can These Stocks Continue Their Run? originally appeared on Fool.com and is written by Anthony Parsons.

Anthony Parsons owns shares of Staples. The Motley Fool owns shares of Staples. Anthony is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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