Intrinsic value of Hewlett Packard Enterprise - HPE

Previous Close

$14.04

  Intrinsic Value

$39.38

stock screener

  Rating & Target

str. buy

+181%

Previous close

$14.04

 
Intrinsic value

$39.38

 
Up/down potential

+181%

 
Rating

str. buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of HPE stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 22.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -3.81
  2.50
  2.75
  2.97
  3.18
  3.36
  3.52
  3.67
  3.80
  3.92
  4.03
  4.13
  4.22
  4.29
  4.36
  4.43
  4.49
  4.54
  4.58
  4.62
  4.66
  4.70
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
Revenue, $m
  50,123
  51,376
  52,789
  54,359
  56,087
  57,971
  60,014
  62,217
  64,584
  67,118
  69,824
  72,707
  75,772
  79,025
  82,474
  86,126
  89,989
  94,072
  98,383
  102,933
  107,732
  112,791
  118,122
  123,738
  129,650
  135,874
  142,424
  149,315
  156,564
  164,187
  172,203
Variable operating expenses, $m
 
  49,826
  51,129
  52,579
  54,172
  55,911
  57,796
  59,829
  62,014
  64,352
  66,849
  67,091
  69,919
  72,921
  76,104
  79,474
  83,039
  86,806
  90,784
  94,983
  99,411
  104,080
  108,999
  114,181
  119,637
  125,380
  131,424
  137,783
  144,471
  151,506
  158,903
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  45,656
  49,826
  51,129
  52,579
  54,172
  55,911
  57,796
  59,829
  62,014
  64,352
  66,849
  67,091
  69,919
  72,921
  76,104
  79,474
  83,039
  86,806
  90,784
  94,983
  99,411
  104,080
  108,999
  114,181
  119,637
  125,380
  131,424
  137,783
  144,471
  151,506
  158,903
Operating income, $m
  4,467
  1,550
  1,659
  1,781
  1,914
  2,060
  2,218
  2,388
  2,570
  2,766
  2,975
  5,616
  5,852
  6,104
  6,370
  6,652
  6,951
  7,266
  7,599
  7,950
  8,321
  8,712
  9,123
  9,557
  10,014
  10,495
  11,000
  11,533
  12,093
  12,681
  13,301
EBITDA, $m
  8,242
  5,018
  5,156
  5,309
  5,478
  5,662
  5,861
  6,076
  6,307
  6,555
  6,819
  7,101
  7,400
  7,718
  8,055
  8,411
  8,789
  9,187
  9,608
  10,053
  10,521
  11,016
  11,536
  12,085
  12,662
  13,270
  13,910
  14,583
  15,290
  16,035
  16,818
Interest expense (income), $m
  585
  450
  493
  539
  591
  648
  710
  777
  850
  928
  1,012
  1,101
  1,196
  1,297
  1,404
  1,518
  1,639
  1,766
  1,901
  2,043
  2,193
  2,351
  2,518
  2,694
  2,879
  3,074
  3,279
  3,495
  3,723
  3,962
  4,213
Earnings before tax, $m
  4,079
  1,100
  1,167
  1,242
  1,323
  1,412
  1,507
  1,610
  1,720
  1,838
  1,963
  4,515
  4,656
  4,807
  4,966
  5,134
  5,312
  5,500
  5,698
  5,907
  6,128
  6,360
  6,605
  6,863
  7,135
  7,420
  7,721
  8,037
  8,370
  8,720
  9,087
Tax expense, $m
  918
  297
  315
  335
  357
  381
  407
  435
  465
  496
  530
  1,219
  1,257
  1,298
  1,341
  1,386
  1,434
  1,485
  1,538
  1,595
  1,655
  1,717
  1,783
  1,853
  1,926
  2,004
  2,085
  2,170
  2,260
  2,354
  2,454
Net income, $m
  3,161
  803
  852
  906
  966
  1,031
  1,100
  1,175
  1,256
  1,342
  1,433
  3,296
  3,399
  3,509
  3,625
  3,748
  3,878
  4,015
  4,160
  4,312
  4,473
  4,643
  4,822
  5,010
  5,208
  5,417
  5,636
  5,867
  6,110
  6,365
  6,634

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  16,347
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  79,629
  64,869
  66,653
  68,636
  70,816
  73,196
  75,775
  78,557
  81,546
  84,745
  88,162
  91,801
  95,671
  99,779
  104,134
  108,745
  113,623
  118,777
  124,221
  129,966
  136,025
  142,413
  149,144
  156,234
  163,700
  171,559
  179,829
  188,530
  197,682
  207,307
  217,429
Adjusted assets (=assets-cash), $m
  63,282
  64,869
  66,653
  68,636
  70,816
  73,196
  75,775
  78,557
  81,546
  84,745
  88,162
  91,801
  95,671
  99,779
  104,134
  108,745
  113,623
  118,777
  124,221
  129,966
  136,025
  142,413
  149,144
  156,234
  163,700
  171,559
  179,829
  188,530
  197,682
  207,307
  217,429
Revenue / Adjusted assets
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
Average production assets, $m
  9,602
  9,864
  10,135
  10,437
  10,769
  11,130
  11,523
  11,946
  12,400
  12,887
  13,406
  13,960
  14,548
  15,173
  15,835
  16,536
  17,278
  18,062
  18,890
  19,763
  20,685
  21,656
  22,679
  23,758
  24,893
  26,088
  27,345
  28,669
  30,060
  31,524
  33,063
Working capital, $m
  6,388
  -6,576
  -6,757
  -6,958
  -7,179
  -7,420
  -7,682
  -7,964
  -8,267
  -8,591
  -8,937
  -9,306
  -9,699
  -10,115
  -10,557
  -11,024
  -11,519
  -12,041
  -12,593
  -13,175
  -13,790
  -14,437
  -15,120
  -15,838
  -16,595
  -17,392
  -18,230
  -19,112
  -20,040
  -21,016
  -22,042
Total debt, $m
  15,695
  13,311
  14,571
  15,971
  17,510
  19,190
  21,011
  22,975
  25,085
  27,344
  29,756
  32,326
  35,058
  37,958
  41,033
  44,288
  47,732
  51,371
  55,214
  59,270
  63,548
  68,058
  72,810
  77,816
  83,086
  88,634
  94,473
  100,616
  107,077
  113,873
  121,019
Total liabilities, $m
  48,181
  45,797
  47,057
  48,457
  49,996
  51,676
  53,497
  55,461
  57,571
  59,830
  62,242
  64,812
  67,544
  70,444
  73,519
  76,774
  80,218
  83,857
  87,700
  91,756
  96,034
  100,544
  105,296
  110,302
  115,572
  121,120
  126,959
  133,102
  139,563
  146,359
  153,505
Total equity, $m
  31,448
  19,071
  19,596
  20,179
  20,820
  21,520
  22,278
  23,096
  23,974
  24,915
  25,920
  26,990
  28,127
  29,335
  30,615
  31,971
  33,405
  34,921
  36,521
  38,210
  39,991
  41,870
  43,848
  45,933
  48,128
  50,438
  52,870
  55,428
  58,118
  60,948
  63,924
Total liabilities and equity, $m
  79,629
  64,868
  66,653
  68,636
  70,816
  73,196
  75,775
  78,557
  81,545
  84,745
  88,162
  91,802
  95,671
  99,779
  104,134
  108,745
  113,623
  118,778
  124,221
  129,966
  136,025
  142,414
  149,144
  156,235
  163,700
  171,558
  179,829
  188,530
  197,681
  207,307
  217,429
Debt-to-equity ratio
  0.499
  0.700
  0.740
  0.790
  0.840
  0.890
  0.940
  0.990
  1.050
  1.100
  1.150
  1.200
  1.250
  1.290
  1.340
  1.390
  1.430
  1.470
  1.510
  1.550
  1.590
  1.630
  1.660
  1.690
  1.730
  1.760
  1.790
  1.820
  1.840
  1.870
  1.890
Adjusted equity ratio
  0.251
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,161
  803
  852
  906
  966
  1,031
  1,100
  1,175
  1,256
  1,342
  1,433
  3,296
  3,399
  3,509
  3,625
  3,748
  3,878
  4,015
  4,160
  4,312
  4,473
  4,643
  4,822
  5,010
  5,208
  5,417
  5,636
  5,867
  6,110
  6,365
  6,634
Depreciation, amort., depletion, $m
  3,775
  3,467
  3,496
  3,528
  3,563
  3,602
  3,644
  3,689
  3,737
  3,789
  3,844
  1,485
  1,548
  1,614
  1,685
  1,759
  1,838
  1,921
  2,010
  2,102
  2,200
  2,304
  2,413
  2,527
  2,648
  2,775
  2,909
  3,050
  3,198
  3,354
  3,517
Funds from operations, $m
  4,468
  4,270
  4,348
  4,435
  4,529
  4,633
  4,744
  4,864
  4,993
  5,131
  5,277
  4,781
  4,947
  5,123
  5,309
  5,507
  5,716
  5,936
  6,169
  6,415
  6,674
  6,947
  7,235
  7,538
  7,856
  8,192
  8,545
  8,917
  9,308
  9,719
  10,151
Change in working capital, $m
  -490
  -160
  -181
  -201
  -221
  -241
  -261
  -282
  -303
  -324
  -346
  -369
  -392
  -416
  -441
  -467
  -494
  -523
  -552
  -582
  -614
  -648
  -682
  -719
  -757
  -797
  -838
  -882
  -928
  -976
  -1,026
Cash from operations, $m
  4,958
  4,431
  4,529
  4,636
  4,750
  4,874
  5,006
  5,146
  5,296
  5,455
  5,624
  5,150
  5,339
  5,539
  5,751
  5,974
  6,210
  6,459
  6,721
  6,997
  7,288
  7,595
  7,917
  8,256
  8,613
  8,989
  9,384
  9,799
  10,236
  10,695
  11,177
Maintenance CAPEX, $m
  0
  -1,021
  -1,049
  -1,078
  -1,110
  -1,146
  -1,184
  -1,226
  -1,271
  -1,319
  -1,371
  -1,426
  -1,485
  -1,548
  -1,614
  -1,685
  -1,759
  -1,838
  -1,921
  -2,010
  -2,102
  -2,200
  -2,304
  -2,413
  -2,527
  -2,648
  -2,775
  -2,909
  -3,050
  -3,198
  -3,354
New CAPEX, $m
  -3,280
  -262
  -271
  -302
  -332
  -362
  -392
  -423
  -454
  -487
  -520
  -553
  -588
  -625
  -662
  -701
  -742
  -784
  -828
  -874
  -921
  -971
  -1,024
  -1,078
  -1,135
  -1,195
  -1,258
  -1,323
  -1,392
  -1,464
  -1,539
Cash from investing activities, $m
  419
  -1,283
  -1,320
  -1,380
  -1,442
  -1,508
  -1,576
  -1,649
  -1,725
  -1,806
  -1,891
  -1,979
  -2,073
  -2,173
  -2,276
  -2,386
  -2,501
  -2,622
  -2,749
  -2,884
  -3,023
  -3,171
  -3,328
  -3,491
  -3,662
  -3,843
  -4,033
  -4,232
  -4,442
  -4,662
  -4,893
Free cash flow, $m
  5,377
  3,147
  3,208
  3,256
  3,309
  3,366
  3,429
  3,497
  3,571
  3,649
  3,733
  3,170
  3,266
  3,367
  3,475
  3,589
  3,709
  3,837
  3,972
  4,114
  4,264
  4,423
  4,590
  4,765
  4,951
  5,146
  5,351
  5,567
  5,794
  6,033
  6,284
Issuance/(repayment) of debt, $m
  170
  1,143
  1,259
  1,400
  1,540
  1,680
  1,821
  1,964
  2,110
  2,259
  2,412
  2,570
  2,732
  2,900
  3,075
  3,255
  3,444
  3,639
  3,843
  4,056
  4,278
  4,510
  4,752
  5,006
  5,271
  5,548
  5,839
  6,143
  6,462
  6,796
  7,146
Issuance/(repurchase) of shares, $m
  -2,543
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,859
  1,143
  1,259
  1,400
  1,540
  1,680
  1,821
  1,964
  2,110
  2,259
  2,412
  2,570
  2,732
  2,900
  3,075
  3,255
  3,444
  3,639
  3,843
  4,056
  4,278
  4,510
  4,752
  5,006
  5,271
  5,548
  5,839
  6,143
  6,462
  6,796
  7,146
Total cash flow (excl. dividends), $m
  3,518
  4,290
  4,468
  4,656
  4,848
  5,046
  5,250
  5,461
  5,680
  5,908
  6,145
  5,740
  5,998
  6,267
  6,549
  6,844
  7,153
  7,476
  7,815
  8,170
  8,542
  8,932
  9,342
  9,771
  10,221
  10,694
  11,190
  11,710
  12,256
  12,829
  13,430
Retained Cash Flow (-), $m
  2,087
  -443
  -524
  -583
  -641
  -700
  -758
  -818
  -879
  -941
  -1,004
  -1,070
  -1,138
  -1,208
  -1,280
  -1,356
  -1,434
  -1,516
  -1,600
  -1,689
  -1,781
  -1,878
  -1,979
  -2,084
  -2,195
  -2,310
  -2,431
  -2,558
  -2,691
  -2,830
  -2,976
Prev. year cash balance distribution, $m
 
  12,820
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  16,667
  3,943
  4,073
  4,207
  4,347
  4,492
  4,643
  4,802
  4,967
  5,141
  4,670
  4,860
  5,060
  5,269
  5,488
  5,719
  5,961
  6,215
  6,481
  6,761
  7,054
  7,363
  7,687
  8,026
  8,383
  8,758
  9,152
  9,565
  9,999
  10,454
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  15,980
  3,610
  3,544
  3,464
  3,369
  3,260
  3,137
  3,001
  2,854
  2,695
  2,218
  2,074
  1,924
  1,769
  1,611
  1,453
  1,297
  1,144
  998
  859
  730
  611
  504
  409
  326
  256
  196
  148
  109
  79
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Hewlett Packard Enterprise Company is a provider of technology solutions. The Company’s segments include: Enterprise Group, Software, Financial Services and Corporate Investments. The Enterprise Group segment provides its customers with the technology infrastructure they need to optimize traditional information technology (IT). The Software segment allows its customers to automate IT operations to simplify, accelerate and secure business processes and drives the analytics that turn raw data into actionable knowledge. The Financial Services segment enables flexible IT consumption models, financial architectures and customized investment solutions for its customers. The Corporate Investments segment includes Hewlett Packard Labs and certain business incubation projects, among others.

FINANCIAL RATIOS  of  Hewlett Packard Enterprise (HPE)

Valuation Ratios
P/E Ratio 7.4
Price to Sales 0.5
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 4.7
Price to Free Cash Flow 13.9
Growth Rates
Sales Growth Rate -3.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -1.9%
Cap. Spend. - 3 Yr. Gr. Rate 5.6%
Financial Strength
Quick Ratio 5
Current Ratio 0.2
LT Debt to Equity 38.7%
Total Debt to Equity 49.9%
Interest Coverage 8
Management Effectiveness
Return On Assets 4.5%
Ret/ On Assets - 3 Yr. Avg. 3.8%
Return On Total Capital 6.6%
Ret/ On T. Cap. - 3 Yr. Avg. 5.5%
Return On Equity 9.7%
Return On Equity - 3 Yr. Avg. 7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 29.2%
Gross Margin - 3 Yr. Avg. 28.9%
EBITDA Margin 16.8%
EBITDA Margin - 3 Yr. Avg. 13.3%
Operating Margin 8.9%
Oper. Margin - 3 Yr. Avg. 5.4%
Pre-Tax Margin 8.1%
Pre-Tax Margin - 3 Yr. Avg. 5%
Net Profit Margin 6.3%
Net Profit Margin - 3 Yr. Avg. 4.7%
Effective Tax Rate 22.5%
Eff/ Tax Rate - 3 Yr. Avg. -6.1%
Payout Ratio 11.8%

HPE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HPE stock intrinsic value calculation we used $50123 million for the last fiscal year's total revenue generated by Hewlett Packard Enterprise. The default revenue input number comes from 2016 income statement of Hewlett Packard Enterprise. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our HPE stock valuation model: a) initial revenue growth rate of 2.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for HPE is calculated based on our internal credit rating of Hewlett Packard Enterprise, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Hewlett Packard Enterprise.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of HPE stock the variable cost ratio is equal to 97.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for HPE stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.7% for Hewlett Packard Enterprise.

Corporate tax rate of 27% is the nominal tax rate for Hewlett Packard Enterprise. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the HPE stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for HPE are equal to 19.2%.

Life of production assets of 9.4 years is the average useful life of capital assets used in Hewlett Packard Enterprise operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for HPE is equal to -12.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $31448 million for Hewlett Packard Enterprise - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1619.66 million for Hewlett Packard Enterprise is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Hewlett Packard Enterprise at the current share price and the inputted number of shares is $22.7 billion.

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COMPANY NEWS

▶ Hewlett Packard Enterprise Falls As Buyback Disappoints Bulls   [Oct-19-17 04:27PM  Investor's Business Daily]
▶ HPE Focuses on Subscriptions and Services   [12:15PM  Morningstar]
▶ [$$] Hewlett Packard Enterprise Issues 2018 Outlook   [11:02AM  The Wall Street Journal]
▶ Hewlett Packard Enterprise Announces FY18 Outlook   [Oct-18-17 07:05PM  GlobeNewswire]
▶ Hewlett Packard Enterprise's Tough Call: Buybacks Or Buyouts?   [04:26PM  Investor's Business Daily]
▶ HPE to Webcast 2017 Securities Analyst Meeting   [Oct-12-17 07:08PM  GlobeNewswire]
▶ [$$] Editor's News Picks   [07:34AM  The Wall Street Journal]
▶ Hewlett Packard Enterprises Moving Averages   [Sep-28-17 10:40AM  Market Realist]
▶ How Influential Are AMDs Epyc Endorsers?   [07:43AM  Market Realist]
▶ Why Hewlett Packard Enterprise Could Focus on Lowering Costs   [Sep-27-17 06:06PM  Market Realist]
▶ Stocks Close Mixed; How The Nasdaq's Big Test Is Faring   [04:13PM  Investor's Business Daily]
▶ Why HPE Could Lay off More Employees   [01:36PM  Market Realist]
▶ Your Datacenter Is Not Safe   [11:01AM  Forbes]
▶ HP Enterprise Layoffs: HPE to Cut 5,000 Jobs   [11:41AM  InvestorPlace]
▶ HPE plans to slash 5,000 jobs, reports say   [10:00AM  American City Business Journals]
▶ [$$] Hewlett Packard Enterprise to Cut 10% of Workforce   [12:18AM  The Wall Street Journal]
▶ [$$] Hewlett Packard Enterprise to Cut 10% of Workforce   [Sep-21-17 11:11PM  The Wall Street Journal]
▶ Hewlett Packard Enterprise to cut 5,000 jobs: report   [08:00PM  San Jose Mercury News]
▶ HP Enterprise said to Cut 5,000 Jobs   [07:54PM  Bloomberg Video]
▶ HPE plans 5,000 job cuts: Bloomberg   [06:57PM  Reuters]
Financial statements of HPE
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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