Hewlett Packard Enterprise (HPE): Is It Cheap For A Reason?

2021-11-16

Introduction

Hewlett Packard Enterprise Co. (HPE) was created on November 1 of 2015 resulting from Hewlett Packard splitting into two entities. In contrast to its hardware focused predecessor, Hewlett Packard Enterprise is focused on the cloud providing information technology and enterprise products, solutions, and services. Since the company was formed it has only been awarded a market multiple of 10 times earnings or less by Mr. Market. Although this is an extremely low valuation relative to other companies with similar fundamental characteristics, I believe it is important consideration that investors need to recognize. Consequently, when ascertaining future value and potential, I believe investors are best served to run those numbers in its normal discounted multiples. However, at the same time, there is the potential for the stock to eventually be awarded a more market neutral P/E ratio of 15 or greater commensurate with other companies with its fundamental characteristics.

The company does pay an attractive dividend providing a yield of 3.27% and the dividend has been maintained but not increased through Covid. Since this was a subscriber request, I thought it was important to point out some of the issues that might explain why the company has been so inexpensive and continues to be so. Caveat emptor.

Hewlett Packard
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Disclosure: Long HPE.

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