Taking a closer look at Hewlett Packard Enterprise Co (HPE, Financial), we observe a daily gain of 6.44% and a slight 3-month loss of 1.21%. With an Earnings Per Share (EPS) of $1.54, the question arises: is the stock Fairly Valued? The following analysis dives into the valuation of Hewlett Packard Enterprise Co, encouraging readers to explore the financial intricacies that determine its market standing.
Company Introduction
Hewlett Packard Enterprise Co, a prominent information technology vendor, offers a range of hardware and software solutions to enterprises. Its main product offerings include compute servers, storage arrays, and networking equipment, alongside a high-performance computing business. With the goal of being a comprehensive edge-to-cloud company, Hewlett Packard Enterprise Co employs a primarily outsourced manufacturing model and maintains a global workforce of 60,000. Comparing the company's stock price of $16.52 to the GF Value, an estimated fair value of $15.76, sets the stage for an in-depth analysis of its intrinsic valuation.
Summarize GF Value
The GF Value is a unique measure that captures the intrinsic value of a stock, integrating historical trading multiples, a GuruFocus adjustment factor based on past performance, and future business performance projections. When a stock's price hovers around the GF Value Line, it suggests that the stock is fairly valued. Conversely, significant deviations above or below this line imply overvaluation or undervaluation, respectively, which can impact future returns.
Currently, Hewlett Packard Enterprise Co appears to be fairly valued according to the GF Value. This suggests that the stock's long-term return may align closely with the company's business growth rate.
Financial Strength
An assessment of a company's financial strength is crucial to mitigating the risk of capital loss. Hewlett Packard Enterprise Co's cash-to-debt ratio of 0.22, ranking lower than 86.77% of its industry peers, indicates a need for caution. However, with an overall financial strength rating of 6 out of 10, the company's fiscal health remains fair.
Profitability and Growth
Consistent profitability reduces investment risk, and Hewlett Packard Enterprise Co has maintained profitability for 9 out of the past 10 years. The company's operating margin of 8.88% stands stronger than 71.77% of competitors in the Hardware industry, reflecting fair profitability with a rank of 7 out of 10. However, its growth metrics, including a 3-year average revenue growth rate lower than 62.27% of the industry, alongside a 3-year average EBITDA growth rate of -4.9%, position the company's growth below 75.06% of its industry counterparts.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) offers insight into profitability. Hewlett Packard Enterprise Co's ROIC of 4.51 falls short of its WACC of 8.2, suggesting that the company may not be generating sufficient returns on its investments.
Conclusion
In conclusion, Hewlett Packard Enterprise Co's stock seems to be fairly valued, with a financial condition and profitability that are both rated as fair. However, its growth lags behind a significant portion of the industry. For a more detailed financial overview, interested investors can review Hewlett Packard Enterprise Co's 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
