Hewlett's Hat Trick

In its recently reported quarter, Hewlett- Packard (NYSE: HPQ) grew its revenues 13 percent over year-ago levels, topping $28 billion. In getting to this number, it benefited from the incredible shrinking dollar, which contributed 5 percent of the revenue growth as rupees, rubles and yuan earned abroad were converted into more and more greenbacks. (HP achieved its strongest sales growth - 22 percent - in the "Asia Pacific" region. Sales in Brazil, Russia, India and China grew especially fast, up 35 percent.)

As for its profits, the company scored a double hat trick, expanding operating profit margins in all six of its business segments. And when you mate expanding margins with rapidly growing revenues, profits just rain down on the bottom line - with diluted earnings per share up 45 percent. Meanwhile, the company has aggressively been buying back billions of dollars' worth of shares, boosting the value of the remaining ones for shareholders.

If you're thinking you've missed the boat, think again. The stock has fluctuated considerably lately, and its price-to-earnings (P/E) ratio was recently below 16. Free cash flow, a better indicator of profitability than earnings, tipped the scales at $2.6 billion in the quarter, and the stock now sells for the low, low price of just 11 times free cash flow. From a price-to-free cash flow perspective, this stock looks significantly undervalued.