There’s nothing like being punished twice for something, which is sort of what happened to one big technology firm recently. On May 16, the company’s stock fell nearly 5% ahead of a scheduled earnings report, thanks to a leaked internal memo from the CEO forewarning of a tough third quarter. The CEO’s concerns officially became public the following day, and the stock resumed its slide for a total loss of about 10% since the initial leak.

Sound familiar? I’m describing the latest of several recent setbacks suffered by the world’s No. 1 PC maker, Hewlett-Packard Co (NYSE: HPQ). 

Two straight quarters of reduced full-year earnings guidance from management have also weighed on HP. The bad news hit before the stock even had a chance to fully recover from the scandal last August in which prior CEO Mark Hurd abruptly resigned amidst allegations of sexual harassment — a situation that led to the replacement of a third of HP’s board of directors.

Considering these recent troubles and the fact that the PC business in general has been struggling with soft consumer demand, you might assume HP is a stock to avoid. You’d be terribly wrong, in my opinion.

It might take a few quarters, perhaps longer, but I believe HP will get back on track. According to analysts, revenue growth may climb back into the low single digits this quarter and should average a solid 7% annually through 2016. Earnings, cash flow, dividends and book value are projected to rise at 11%, 10.5%, 14% and 15%, respectively, during that time.

There are several reasons HP can deliver these results, such as with a ramp-up of investment in its sales force and new software. Since the firm’s software offerings are weak, Hurd’s successor, Leo Apotheker, has said he’d like to double or triple software sales through internal investment and acquisition of outside software vendors. HP made excellent progress toward that goal in the second quarter, growing software revenue by 17% year-over-year with a 20% operating margin.

#-ad_banner-#Apotheker also plans to keep HP on the cutting edge by moving into cloud computing (the delivery of products and services online), continuing to invest heavily in high-margin products like tablet computers and smartphones and increasing the firm’s already formidable presence in developing countries. Under senior vice president Brian Humphries, who joined the company on March 30 to lead the push into emerging markets, HP will focus in particular on Africa, Southeast Asia and Eastern Europe.

Meanwhile, core businesses continue to perform strongly. PCs still generate 30% of revenue, for example. The printer and enterprise servers, storage and networking (ESSN) segments each recently reported year-over-year revenue gains of 7% and 15%, respectively. Analysts say the ESSN segment should keep expanding at a double-digit rate through increased demand and growing market share. Aggressive expansion of support services is expected to be a key contributor to future growth by increasing customers’ reliance on HP and could soon account for as much as a third of revenue.

Ink cartridges and other printer supplies have long delivered large and steady profits. However, that income source will probably diminish over time, especially at the low end of the market, due to competition from generic substitutes. To compensate, HP plans to focus more on high-end items like photos, multifunction devices and commercial printing, which are more likely to gain loyal customers. 

The company faces other obstacles, including renewed competition in the servers market from Cisco Systems (Nasdaq: CSCO), Dell Inc (Nasdaq: DELL) and Oracle Corp (Nasdaq: ORCL). Plus, the PC market is more challenging than ever because there isn’t much differentiation between brands and consumers are shifting to tablets and other alternatives.

HP has about $20 billion of debt. I’m not concerned about it, though, because the firm also has more than $10 billion in cash and equivalents and typically generates $8-10 billion of free cash flow annually.

Action to Take –> Despite the obstacles it faces, HP is ready for a strong comeback. I’d jump in now while the stock is cheap. At about $36 a share, it’s trading more than 50% below what analysts estimate it’s worth. Furthermore, the stock has very exciting long-term growth potential. Based on analysts’ forecasts, the price could hit $95 by 2016, good for an average annual return of more than 20%.

P.S. — I don’t know if you’re aware of this or not, but a 20-year energy agreement between the United States and Russia is about to expire. The problem is, this deal supplies 10% of America’s electricity. When the Russians refuse to renew the agreement, the U.S. will face an entirely new kind of energy crisis. This disruption could send a handful of energy stocks through the roof. Keep reading…