Razor-maker Gillette was among the first major companies to popularize a now common business strategy — practically giving away razors but selling the blades at a premium, insuring a reliable revenue stream for years to come, notes Richard Moroney, editor of Dow Theory Forecasts.

That marketing philosophy also applies to printers and their ink cartridges, such as the ones made by HP (HPQ). In November 2015, HP decided to keep its focus on printers and personal computers, spinning off its corporate-technology business (servers, networking equipment, and services) as Hewlett Packard Enterprise (HPE).

For the 12 months ended July, HP increased per-share profits 75% on 13% higher revenue, while the average stock in the hardware, storage, and peripherals industry grew earnings 16% and sales 4%. HP’s operating cash flow rose 15% and free cash flow 16% in the past year.

Management is using that cash to fund the dividend (yield of 2.1%, not counting the company’s plans for a 15% hike next year) and share repurchases, cutting the share count by about 10% since the split-up.

HP's personal-systems business comprises mostly personal computers. The printing unit includes traditional printers and scanners. Notably, HP generates most of its printing-related revenue from ink cartridges and other supplies. HP is also developing 3D printing, though the technology may not produce meaningful sales for several years. 

Though its trailing P/E ratio has risen to 14, versus its three-year average of 10 and industry average of 13, the stock still scores 76 in Quadrix Value. Early this month, the company projected profit growth of 5% to 10% in fiscal 2019 ending October, versus the 7.5% consensus.

HP offers robust operating momentum, share-price action, and analyst revision trends to go along with an attractive valuation. Just a handful of stocks in the S&P 1500 Index score in the top 25% of Quadrix for Momentum, Performance, and Value. HP is a long-term buy.

Subscribe to Richard MOroney's Dow Theory Forecasts here…