Justin Sullivan
Dear readers/subscribers,
It’s time to publish an update article about Hewlett Packard (NYSE: HPE) right now. Since my last article on the company, HPE has remained strangely strong in the face of continued market pressure. In fact, the company has beaten the market, anything many investors don’t seem to expect anything from HPE.
HPE article (In Search of Alpha)
Although volatile, the company has continued to demonstrate operational stability in the face of market instability, and that is a great merit in today’s volatile market.
Technology and software stocks have fallen overall. We’re seeing a large capital outflow from those investments on a very broad basis as interest rates normalize (make no mistake, 0% interest rates never became “normal” over the long term). So, with that in mind, now is the right time to position yourself in wonderful investments that offer wonderful returns, even if the market doesn’t pass much higher.
So, let’s get here.
I talked about the significant tailwinds for HPE as a company. These tailwinds continued and continue to this day. This comes with the company’s recent earnings package, which we will review in this article and which will come in our future calculations.
HPE is just a small component of Hewlett Packard. The company created when it spun off from HP’s largest company, and what it became within HPE were servers, storage, networking, containerization, consulting and support, and software. The former Hewlett Packard replaced its call to HP Inc and now trades under another symbol (HPQ). HPQ would remain a private history of equipment, printing and inventory, sticking HPE with its own ticker and history.
But in this case, we take a look at what would be the most important component of things: HPE, and in particular seven business segments of computing, high-performance computing, and critical systems (“HPC”).
We’ve noticed how the company has been able to exhibit impressive operational stability and biological earnings expansion this year. These positive trends continue in the new set of effects we are looking for here.
And 3Q22 even more growth, in addition to 2Q22.
HPE IR (HPE IR)
A sequential build-up of 5% and above the company’s initial forecasts/prospects is impressive, but even more impressive is the fact that the company has strived to keep its GMs stable, its operating profit increased 8% year-over-year and 16% quarter-over-quarter, and leading and out-of-the-expected cash revenue expansion here.
I’ve focused a bit on expansion and service order trends here, and the positive trends continue here, leading the company to affirm the 2024E CAGR of 45% in the high-end AAS segment.
HPE IR (HPE IR)
The company is showing EPS expansion in an environment where many corporations struggle to report only profit declines, in a combination of solid price values and a more service-oriented mix, which leads more to positive margin expansion. The company’s CEOs have never fallen below 30% over the past 2-3 years, and its operating margin has remained solid between 7-11%.
The company manages a superbly differentiated portfolio designed to do one thing: capitalize on high-level and high-level trends, in spaces like AI, IT, storage, monetary and edge. It’s going very well. The only segment that shows any kind of “lag” or slowdown is the monetary segment, and even this segment shows an expansion in operating margin and assets of up to 2% year-on-year with an RoE of almost 19. 5%, which is higher than the type of pre-pandemic levels.
Key balance sheet signs show steady strength and, due to its indebtedness, the company has a net monetary position of $700 million. It’s pretty impressive these days.
There is the war in Europe and the continuous closures of China due to COVID-19, and despite this, revenues and EPS remained, they are increasing.
Consider what might happen if it didn’t (in terms of headwinds). At the same time, the company has managed, through highly strategic pricing actions, to generate resilient margins, which have remained virtually solid despite the large contribution. related headwinds and global macroeconomic slowdowns.
Operating margins continue to grow the company, giving us a significant overall advantage.
In my opinion, the company’s diverse portfolio is able to capitalize on today’s global megatrends in cloud data, connectivity and global storage. to a 33/33/33 division between NA/EMEA/APJ (plus NA, minus APJ).
It’s also a clear shift that organizations may no longer need IT as a custom solution with on-premises products, necessarily “buy” the products and be left to manage them, but would prefer to buy IT as a service, again, as noted. the expansion of the company’s specific AAS segments. The company, in particular, has followed a portfolio design that the market, for now, seems to need.
One more word about security before continuing. HPE’s net monetary position in a single quarter advanced in part of the billion dollars. This gives you confidence in the company’s ability to generate impressive profits over time.
I describe those newer effects of 3Q22 as very smart and the last stepping stone in the overall positive trajectory of the company. The market didn’t like the more recent earnings so much, or at least in tandem with earnings, as they reduced the 2023E adjusted EPS – however, demand for the company’s facilities remains strong. Moreover, the explanation for why the decline in profits was not due to anything internal, but to the continued headwinds of the currency.
This is how it is seen in the last quarter or in the last presentation to investors that demanding situations are observed, those demanding situations are in no way a thesis or an opposite break for me.
Let’s take a look at the evaluation.
HPE continues to operate at a price well below what the company costs, and even the market, on average, has made the company costly. A 7. 7x P/E: Sounds moderate for a BBB-rated company?Corporate with record EPS expansion at 14% CAGR over the last 6-7 years?
Not really, I would say. While there has been some volatility in EPS COVID-19, the overall picture I see remains that the company is surely a strong player here, and is very likely to continue to grow as expected.
Overall, the company has returned to very good effects and expects its profits to continue to grow in the next fiscal year.
Take a look at existing price trends and forecasts.
HPE Rating (F. A. S. T. Graphics)
Now, this is the kind of symbol that can raise the question of what’s wrong with a certain company. However, in this case, I don’t see any kind of underlying or undocumented threat that deserves your attention or opinion, what threats are possible. , or as for many companies, outside of its – as FX.
The fact is, I never predicted HPE above 9. 5x D/E. The company hasn’t proven it deserves it in the market right now despite EPS expansion, and future expansion is around 5. 2% consistent with the year, meaning expect the following types of trends here.
HPE Upside (F. A. S. T. Graphics)
This, dear readers, is an annual conservative accumulation of 17. 5% for a P/E below 10x and even below 9. 5x, resulting in an incredibly well-covered 3. 39%, while rating BBB. This is not the most productive opportunity in terms of evaluation and quality of the underlying company. But it’s still a wonderful opportunity in a volatile market.
Even if the company sticks more or less to its current valuation range, it’s still a conservative increase very close to double digits, and those two arguments are part of why I keep pushing cash to jobs at HPE, and why I think you could do the exact same thing.
Performance does not exceed market performance; However, with 3. 3%, it does not have to be. The combined prospective appreciation of capital and this dividend produce enough returns to satisfy even conservative investors, as they have double-digit figures in a volatile world. Can you want more?
If we take a look at analysts’ averages, S
The company is a BBB-rated IT company with deep roots in the industry with a P/E below 9X or a profit transfer well above 6%. spend up to 15X or more here, however, we can use the well-established reduction average to see where the business can advance.
HPE has achieved 6-year EPS expansion of more than 10% and is expected to continue growing at that level, 5-8% CAGR through 2024; this includes an EPS rebound of 40% in 2021, followed by 2 years of Lean, single-digit expansion.
I consider any valuation below $17. 5 for this company to be too reasonable, and I see no explanation for why giving the company anything more than a small drop to account for some of the more direct monetary impacts. That means I’m going to go from $18. 5/share to $18/share, which is just a small change.
I’m still in a “BUY” for HPE, and with Infineon (OTCQX:IFNNY) and Qualcomm (QCOM), this represents one of the few opportunities in the area that I find remotely interesting.
My thesis for HPE is:
Remember, I mean:
1. Buy undervalued corporations, even if that undervaluation is slight and incredibly large, at a discount, allowing them to normalize over time and earn capital gains and dividends in the meantime.
2. Si the company goes far beyond normalization and overvalues itself, I reap profits and change my position to other undervalued stocks, repeating No. 1.
3. Si the company goes into overvaluation but is at a fair price or is returning to undervaluation, I buy more if time permits.
4. Je reinvest the proceeds of dividends, hard work savings, or money receipts as specified in #1.
These are my criteria and how the company meets them (in italics).
This means that the company meets all my criteria, so it’s a “BUY” here.
Thanks for reading.
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This article written by
36-year-old DGI investor/senior personal portfolio control analyst for several clients in Sweden. It invests in the United States, Canada, Germany, Scandinavia, France, the United Kingdom and BeNeLux. actions and be an authority on price investments as well as similar issues.
I am an iREIT contributor at Alpha as Dividend Kings here at Seeking Alpha and work as a senior research analyst for Wide Moat Research LLC.
Disclosure: I have/have a long advantageous position in the shares of HPE, IFNNY, QCOM, whether through ownership of shares, features or other derivatives. I wrote this article myself and it expresses my own opinions. I don’t get any refunds for this (other than Seeking Alpha). I have nothing to do with a company whose actions are analyzed in this article.
Additional disclosure: While this article may sound like monetary advice, keep in mind that the writer is not a CFA or is otherwise written to give monetary advice. It would possibly be structured as such, but it is not a monetary advice. Investors are required and expected to conduct their own due diligence and conduct their own studies prior to any investment. Short-term trading, trading/investing functions, and futures trading are potentially incredibly dangerous investment styles. Sometimes they are not suitable for someone with limited capital, limited investment experience, or lack of understanding of mandatory threat tolerance. It is never the writer’s goal to give personalized monetary advice, and publications deserve to be thought of as articles of study and commercial interest. The writer owns the European/Scandinavian tickers (not ADRs) of all European/Scandinavian corporations indexed in the articles. The writer owns the Canadian tickers for all Canadian stocks discussed.