Is Hewlett Packard Enterprise (HPE) Attractively Priced After Recent Share Price Pullback?

• If you are wondering whether Hewlett Packard Enterprise (HPE) is attractively priced right now, this article walks through what the current share price could mean for long term investors.
• HPE recently closed at US$21.55, with returns of 1.3% over the past year, a 48.8% gain over 3 years, and a 68.3% gain over 5 years, despite a 9.5% decline over the last 7 days and a 10.8% decline year to date.
• Recent coverage has focused on HPE's role as a major enterprise technology provider and how shifting interest in the broader tech sector has fed into changing expectations for established names like this. These themes help explain why the stock has seen periods of renewed attention alongside patches of weaker recent returns.
• On our checks, Hewlett Packard Enterprise scores a 6/6 valuation rating. In the next sections we will compare the current share price against several valuation approaches, then finish with a way to look beyond the headline metrics to the full valuation story.

Find out why Hewlett Packard Enterprise's 1.3% return over the last year is lagging behind its peers.

Approach 1: Hewlett Packard Enterprise Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes the cash a company is expected to generate in the future and discounts those amounts back to today to estimate what the business might be worth now.

For Hewlett Packard Enterprise, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flows reported and projected in US$. The latest twelve month free cash flow is about $174.5m. Analyst estimates and extrapolated projections used in this model point to free cash flow of $3.891b in 2030, with a series of annual figures in between that are discounted back to today.

Putting those cash flows together, Simply Wall St’s DCF model arrives at an estimated intrinsic value of $34.91 per share. Compared with the recent share price of $21.55, this implies the stock is around 38.3% undervalued under these assumptions.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Hewlett Packard Enterprise is undervalued by 38.3%. Track this in your watchlist or portfolio, or discover 53 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Hewlett Packard Enterprise.

Approach 2: Hewlett Packard Enterprise Price vs Sales

For Hewlett Packard Enterprise, the preferred valuation yardstick is the Price to Sales, or P/S, ratio. This can be useful when earnings are less informative, for example because profits are volatile or affected by one off items. Investors often look for a higher P/S when they expect stronger growth or see lower risk, and a lower P/S when growth expectations or perceived quality are more modest.

Hewlett Packard Enterprise currently trades on a P/S of 0.83x. That sits below the broader Tech industry average P/S of 1.99x and also below the peer group average of 2.74x. Simply Wall St’s Fair Ratio for Hewlett Packard Enterprise is 2.52x. This is the P/S level its model suggests based on factors such as the company’s growth profile, profit margins, industry, market value and specific risks.

This Fair Ratio aims to give a more tailored view than a simple comparison with industry or peer averages. Those benchmarks do not adjust for the company’s own growth outlook, risk characteristics and profitability. Lining up the Fair Ratio of 2.52x against the current 0.83x P/S suggests the shares trade below the level implied by this model.

Result: UNDERVALUED

P/S ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 22 top founder-led companies.

Upgrade Your Decision Making: Choose your Hewlett Packard Enterprise Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of Hewlett Packard Enterprise’s future with numbers by turning your story about its revenue, earnings and margins into a forecast, linking that to a Fair Value, and then comparing that Fair Value with today’s share price to help you decide whether the stock looks appealing or stretched.

On Simply Wall St’s Community page, millions of investors use Narratives as an accessible tool where they can set their own assumptions and see a Fair Value that updates automatically when new information such as news or earnings is added, so the story and the numbers stay aligned without extra work.

For example, one Hewlett Packard Enterprise Narrative might lean toward the higher end of current analyst Fair Values around US$31.00 per share, built on expectations closer to the more optimistic price targets around US$30.00, while another might sit nearer the lower Fair Value of about US$16.00. By comparing each Fair Value with the latest market price, you can quickly see which story feels closer to your own view before making any buy or sell decisions.

For Hewlett Packard Enterprise, however, we will make it really easy for you with previews of two leading Hewlett Packard Enterprise Narratives:

Both are built from analyst assumptions and a Fair Value, but they tell very different stories about what those numbers might mean for you as a shareholder.

🐂 Hewlett Packard Enterprise Bull Case

Fair Value in this bullish narrative: US$31.00 per share

Implied undervaluation versus the last close of US$21.55: about 30.5%

Modeled revenue growth rate: 11.12% a year

• Juniper integration, AI systems demand and GreenLake recurring revenue are treated as strong supports for higher earnings, margins and cash flow over time.
• The narrative assumes revenue reaching US$47.1b and earnings of US$5.2b by around 2028, with profit margins stepping up as networking and software-like services take a larger share of the mix.
• To line up with this view, you would need to be comfortable with HPE trading on a future P/E of 10.7x in 2028 and with execution on AI, networking and cloud remaining on track despite competition and regulatory costs.

🐻 Hewlett Packard Enterprise Bear Case

Fair Value in this bearish narrative: US$16.00 per share

Implied overvaluation versus the last close of US$21.55: about 34.2%

Modeled revenue growth rate: 9.79% a year

• This view gives more weight to the DOJ lawsuit on the Juniper deal, tariffs and server pricing pressure, which together are treated as headwinds for margins and future earnings.
• The narrative assumes revenue of US$41.9b and earnings of US$4.0b by around 2028, but with a lower 7.2x P/E multiple, reflecting concern that the market may be expecting too much today.
• To agree with this case, you would need to see risks around integration, competition and cost control as front and center, and to be wary of paying above what this more cautious Fair Value implies.

Together, these narratives bracket the current debate around HPE and give you a clear way to test which story feels closer to your own expectations before you make any decisions about the stock.

Curious how numbers become stories that shape markets? Explore Community Narratives

Do you think there's more to the story for Hewlett Packard Enterprise? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com