Are Investors Undervaluing Hewlett Packard Enterprise (HPE) Right Now?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One stock to keep an eye on is Hewlett Packard Enterprise (HPE). HPE is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock holds a P/E ratio of 8.38, while its industry has an average P/E of 9.33. HPE's Forward P/E has been as high as 12.03 and as low as 7.72, with a median of 9.89, all within the past year.
Investors should also note that HPE holds a PEG ratio of 1.32. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. HPE's industry currently sports an average PEG of 1.70. Within the past year, HPE's PEG has been as high as 1.93 and as low as 0.83, with a median of 1.15.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. HPE has a P/S ratio of 0.65. This compares to its industry's average P/S of 1.81.
Finally, investors should note that HPE has a P/CF ratio of 6.10. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 9.58. HPE's P/CF has been as high as 7.15 and as low as 3.84, with a median of 4.52, all within the past year.
Value investors will likely look at more than just these metrics, but the above data helps show that Hewlett Packard Enterprise is likely undervalued currently. And when considering the strength of its earnings outlook, HPE sticks out at as one of the market's strongest value stocks.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.