HPE Stock Forecast: Value Tech Stock Worth the Longer Run

Opher Joseph  This HPE Stock Forecast article was written by Opher Joseph – Financial Analyst, I Know First.

Highlights

  • The enterprise computing giant has achieved around 20% order growth over the past year.
  • The global cloud computing market is expected to grow at a CAGR of close to 16% between 2021 and 2026.
  • ROCE has increased during the last 5 years by 34%.
  • The company has maintained shown a decreasing trend of debt and also a steady pay-out of dividends over the years and the dividend yield is bound to improve with higher growth projections.

Overview

Hewlett Packard Enterprise Company (HPE) is an edge-to-cloud platform-as-a-service company. The Company’s segment includes Compute, High-Performance Computing & Mission-Critical Solutions (HPC & MCS), Storage, Intelligent Edge, Financial Services (FS), and Corporate Investments and Other. The Compute segment offers both general-purpose servers for multi-workload computing and workload-optimized servers. The HPC & MCS segment offers specialized computer servers designed to support specific workloads. The Storage segment offers workload-optimized storage product and service offerings. The Intelligent Edge segment offers wired and wireless local area network (LAN), campus and data center switching, and software-defined wide-area-networking. The FS segment provides flexible investment solutions, such as leasing, financing, and utility programs. The Corporate Investments and Other segment include the Communications and Media Solutions business (CMS) that offers software and related services.

(Source: flickr.com)

HME’s Modest Valuation

The enterprise computing giant has achieved around 20% order growth over the past year. According to Markets and Markets, the global cloud computing market is expected to grow at a compound annual growth rate (CAGR) of close to 16% between 2021 and 2026. ROCE has increased during the last 5 years by 34%. Amidst these positive indicators, HPE continues to be available at an attractive valuation offering potential for growth following positive market expectations around the industry and the company.

The P/E ratio of the company is 5.54 better than 93.15% of the companies in the Hardware industry. To further back this up, it has an ROE of 20.63% better than 86.55% of the companies, and a ROA of 6.65% better than 69.96% of the companies in its industry. The company has outperformed analyst earnings estimates for the last 4 quarters and has turned profitable this year.

Strong Fundamentals to Boost Growth

The Cash to Debt ratio of the company is 0.27% and the Debt to Equity ratio is 0.69% which indicates a heavy debt on the books of the company. However, the company has just turned profitable and is generating operating cash flows to cover not only its debt and interest outflows, but also has healthy dividend pay-out and dividend coverage ratios. The company has maintained shown a decreasing trend of debt and also a steady pay-out of dividends over the years and the dividend yield is bound to improve with higher growth projections. The dividend growth rate is 8.6% which is higher than 64.49% of the companies in the industry. The company has been carrying out share buy-back schemes to further boost shareholder returns. The share buy-back ratio of the company is 3.1%, which is better than 97.49% of the companies in the industry. These dividend payouts and share buy-backs are well covered by the cash flows generated by the company.

HME also looks attractive in terms of the Piotroski F-Score. The Piotroski F-score is a number between 0 and 9 that is used to assess the soundness of a company’s financial position. A score of 8 may indicate that the company’s stock is undervalued and can be interpreted by investors as a good signal to buy the stock.

*Data source: seekingalpha.com
(Valuation Ratios for HPE and Its Peers)

Moreover, HME looks interesting in terms of the comparable valuation. Let’s look at the next comparable companies: FUJIY, STX, WDC, NTAP, and CAJ. HPE’s current P/E ratio of 5.51 and P/S ratio of 0.72 appear to be undervalued against its peers.

Conclusion

HPE has all the indicators of being a promising value stock. Also, its current market price means that it is available at an attractive valuation with a comfortable buffer on its true intrinsic fair value of at least 25%. With the market forecasts expecting it to grow beyond the $20 mark, I surely recommend buying and holding this stock for the long run.

It is worth paying attention that the stock-picking AI of I Know First has a high signal on the one-year market trend forecasts, supporting my position for the HPE stock forecast. The light green for the short-term forecasts is mildly bullish, while the darker green is a strong bullish signal for the one-year forecast.

Past Success With HPE Stock Forecast

I Know First has been bullish on the HPE stock forecast in the past. On December 5th, 2021 the I Know First algorithm issued a forecast for HPE stock price and recommended HPE as one of the best S&P500 stocks to buy. The AI-driven HPE stock prediction was successful on a 1-month time horizon resulting in more than 11.34%.

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Please note-for trading decisions use the most recent forecast.