Hewlett Packard (HPE:NYS) Fundamental Valuation Report


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Hewlett Packard $14.80 (USD) Close Price as of 19/12/2017

Based on the analysis conducted in this report, Hewlett Packard, (HPE:NYS) is found to be  Fairly valued to slightly Undervalued.

Company Hewlett Packard
Symbol:Exchange HPE:NYS
Industry Technology:Communication Equipment
Close Price/Date $14.80 (USD) 19/12/2017
Weighted Average Valuation $15.39 (USD)
Summary HPE:NYS is found to be  Fairly valued to slightly Undervalued by 4.0% using the 2 valuation models shown below.
Valuation Models Used Analyst Consensus: $16.14 (USD)
(in order of importance) Adjusted Book Value: $14.25 (USD)
Valuation Methods Analysis This company is:
Cash Flow Basis: Overvalued on a Cash Flow Valuation basis
Comparable Company Basis: Undervalued on a Comparable Valuation basis
Asset Basis: Fairly valued on an Asset Valuation basis

Valuation Details

Hewlett Packard Valuations

Summary chart

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for HPE:NYS

Using a discounted cash flow model generates a negative intrinsic value due to one of 1) zero or negative projected cash flows 2) excessive capital expenditures or 3) excessive debt to calculated equity value for HPE:NYS. We have not shown the calculated value here for that reason.

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $29.81 (USD) for HPE:NYS. We also generated a valuation of $10.92 (USD) using other metrics and comparables.
The comparable companies were CommScope Holding Co (COMM:NAS), Harris (HRS:NYS), Juniper Networks (JNPR:NYS), Motorola Solutions (MSI:NYS) and Zayo Group Holdings (ZAYO:NYS)

Company HPE:NYS End Date Value
Earnings/Share $0.21 (USD)
Book Value/Share $14.72 (USD)
Sales/Share $17.25 (USD)
Cash Flow/Share $0.53 (USD)
EBITDA/Share $2.20 (USD)
Price Based on Comps Adjustment Factor (%)
$8.47 (USD) 0.0
$68.01 (USD) 0.0
$45.11 (USD) 0.0
$8.43 (USD) 0.0
$19.03 (USD) 0.0
HPE:NYS Ratios Used Average Values COMM:NAS HRS:NYS JNPR:NYS MSI:NYS ZAYO:NYS
56.92 PE Ratio 40.35 38.60 26.70 17.03 23.92 95.50
1.01 PB Ratio 4.62 4.65 5.69 2.07 0.00 6.07
0.86 PS Ratio 2.62 1.62 2.98 2.13 2.51 3.85
27.87 PCF Ratio 15.86 19.12 28.29 8.00 14.41 9.51
7.63 EV to EBITDA 12.48 13.07 14.80 8.11 12.44 13.98

Multiples

Using a multiples approach we generated a valuation of  $9.09 (USD) for HPE:NYS

Company HPE:NYS End Date Value
Earnings/Share $0.21 (USD)
Book Value/Share $14.72 (USD)
Sales/Share $17.25 (USD)
Cash Flow/Share $0.53 (USD)
EBITDA/Share $2.20 (USD)
Price Based on Comps Adjustment Factor
$2.66 (USD) 0
$14.26 (USD) 0
$10.77 (USD) 0
$5.20 (USD) 0
$12.57 (USD) 0
Ratios Ratio Average
PE Ratio 12.68
PB Ratio 0.97
PS Ratio 0.62
PCF Ratio 9.79
EV to EBITDA 5.73

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  HPE:NYS for the last 2 years was  0.97

We ran the Adjusted Book Value for  HPE:NYS and generated a book value of  $14.71 (USD)
By multiplying these we get an adjusted valuation of  $14.25 (USD)

Analyst Data

In the Stockcalc database there are 7 analysts that provide a valuation for HPE:NYS. The 7 analysts have a concensus valuation for HPE:NYS for 2018 of $16.14 (USD).

HPE:NYS Hewlett Packard

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
5 5 0 4.0000 Outperform 2017-12-18

Current Price: not available

Analyst Consensus
USD Millions 2018 2019 2020
Mean EPS 1.18 1.26 1.33
# EPS Analysts 10 9 4
Mean Revenue 29,071.20 29,291.40 30,385.10
# Revenue Analysts 8 8 4
Mean Target Price 16.14
Mean Cash Flow 1.93 2.39 2.84
Mean EBITDA 4,427.60 4,853.90 5,038.90
Mean Net Income 1,990.40 2,054.60 2,033.60
Mean Debt Outstanding 941.70 117.20 510.80
Mean Tax Rate 19.45 20.20 19.50
Mean Growth Rate 4.44
Mean Capital Expenditure 2,012.20 1,998.30 2,208.30

Company Overview (HPE:NYS USD)

Price 14.71
Range 14.64 – 14.79
52 week 12.81 – 19.16
Open 14.79
Vol / Avg. 9.26M/12.37M
Mkt cap 23.82B
P/E 58.46
Div/yield 0.08/2.04
EPS 0.25
Shares 1.59B
Beta     –
Inst. own 86%
Summary chart

Detailed Company Description

Hewlett Packard Enterprise Co is a communication equipment company that provides servers, storage, networking and technology services. Its business segments are Enterprise Group, Software, Enterprise Services, Financial Services and Corporate Investments.

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.
The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).
The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.
With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.
If we have Analyst coverage for the company we use the consensus target price here.

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