Hewlett-Packard Company (NYSE:HPQ)’s management team has done an admirable job of improving cash flow despite the company’s other problems. If HP hits its $8 billion target this year, that will represent modest growth over last year’s free cash flow of $7.5 billion.
For a value stock like HP, free cash flow is one of the most important metrics for investors to follow. It highlights the amount of cash that the business is generating, which is also the amount that shareholders could potentially receive in the form of dividends or share repurchases. Moreover, Hewlett-Packard Company (NYSE:HPQ) is on the verge of hitting its zero net-debt target, at which point it will be able to deploy more of its cash flow for such shareholder-friendly actions.
Foolish bottom line
It’s easy to get caught up in the day-to-day hype of Wall Street’s talking heads. HP’s exit from the Dow Jones Industrial Average (INDEXDJX:.DJI) may seem like an important event, but for long-term (or even medium-term) investors, it’s not. “Dow membership” does not show up anywhere in HP’s cash flow statement. As long as HP continues to crank out cash at an $7.5-$8 billion/year rate, and returns that cash to shareholders, HP investors will be very happy in the end.
The article Who Cares That HP Was Booted From the Dow? originally appeared on Fool.com and is written by Adam Levine-Weinberg.
Fool contributor Adam Levine-Weinberg owns shares of Hewlett-Packard Company. The Motley Fool recommends Bank of America, Goldman Sachs, Nike, and Visa. The Motley Fool owns shares of Bank of America, Nike, and Visa.
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