Intrinsic value of Hewlett Packard Enterprise - HPE

Previous Close

$16.41

  Intrinsic Value

$68.58

stock screener

  Rating & Target

str. buy

+318%

Previous close

$16.41

 
Intrinsic value

$68.58

 
Up/down potential

+318%

 
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.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of Hewlett Packard Enterprise (HPE) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -4.65
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
Revenue, $m
  28,871
  31,238
  33,700
  36,259
  38,917
  41,680
  44,552
  47,537
  50,641
  53,871
  57,233
  60,733
  64,379
  68,180
  72,144
  76,279
  80,596
  85,103
  89,813
  94,735
  99,881
  105,263
  110,895
  116,789
  122,960
  129,422
  136,190
  143,281
  150,712
  158,500
  166,664
Variable operating expenses, $m
 
  26,753
  28,723
  30,770
  32,898
  35,110
  37,408
  39,797
  42,282
  44,866
  47,557
  48,606
  51,525
  54,567
  57,739
  61,048
  64,503
  68,111
  71,880
  75,819
  79,938
  84,245
  88,753
  93,470
  98,409
  103,580
  108,997
  114,672
  120,619
  126,852
  133,386
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
  28,249
  26,753
  28,723
  30,770
  32,898
  35,110
  37,408
  39,797
  42,282
  44,866
  47,557
  48,606
  51,525
  54,567
  57,739
  61,048
  64,503
  68,111
  71,880
  75,819
  79,938
  84,245
  88,753
  93,470
  98,409
  103,580
  108,997
  114,672
  120,619
  126,852
  133,386
Operating income, $m
  622
  4,486
  4,977
  5,488
  6,019
  6,571
  7,144
  7,740
  8,360
  9,005
  9,676
  12,127
  12,855
  13,614
  14,405
  15,231
  16,092
  16,993
  17,933
  18,916
  19,943
  21,018
  22,142
  23,319
  24,551
  25,842
  27,193
  28,609
  30,093
  31,648
  33,278
EBITDA, $m
  3,673
  7,222
  7,791
  8,383
  8,997
  9,636
  10,300
  10,990
  11,708
  12,454
  13,232
  14,041
  14,884
  15,762
  16,679
  17,635
  18,633
  19,675
  20,764
  21,902
  23,091
  24,336
  25,638
  27,000
  28,427
  29,921
  31,486
  33,125
  34,843
  36,643
  38,531
Interest expense (income), $m
  415
  356
  455
  556
  662
  772
  886
  1,005
  1,129
  1,257
  1,390
  1,529
  1,674
  1,825
  1,982
  2,146
  2,317
  2,495
  2,682
  2,876
  3,080
  3,293
  3,515
  3,748
  3,992
  4,247
  4,514
  4,794
  5,087
  5,394
  5,716
Earnings before tax, $m
  272
  4,129
  4,523
  4,932
  5,357
  5,799
  6,258
  6,735
  7,231
  7,748
  8,286
  10,597
  11,181
  11,789
  12,423
  13,085
  13,776
  14,497
  15,251
  16,039
  16,863
  17,725
  18,627
  19,571
  20,560
  21,595
  22,679
  23,815
  25,006
  26,254
  27,562
Tax expense, $m
  -164
  1,115
  1,221
  1,332
  1,446
  1,566
  1,690
  1,818
  1,952
  2,092
  2,237
  2,861
  3,019
  3,183
  3,354
  3,533
  3,719
  3,914
  4,118
  4,331
  4,553
  4,786
  5,029
  5,284
  5,551
  5,831
  6,123
  6,430
  6,752
  7,088
  7,442
Net income, $m
  344
  3,014
  3,301
  3,600
  3,910
  4,233
  4,568
  4,917
  5,279
  5,656
  6,049
  7,736
  8,162
  8,606
  9,069
  9,552
  10,056
  10,583
  11,133
  11,709
  12,310
  12,940
  13,598
  14,287
  15,009
  15,764
  16,556
  17,385
  18,254
  19,165
  20,120

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  12,957
  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
  61,406
  52,413
  56,544
  60,836
  65,297
  69,933
  74,751
  79,760
  84,969
  90,388
  96,028
  101,901
  108,019
  114,396
  121,046
  127,985
  135,227
  142,791
  150,692
  158,951
  167,585
  176,616
  186,066
  195,955
  206,309
  217,151
  228,507
  240,405
  252,873
  265,940
  279,638
Adjusted assets (=assets-cash), $m
  48,449
  52,413
  56,544
  60,836
  65,297
  69,933
  74,751
  79,760
  84,969
  90,388
  96,028
  101,901
  108,019
  114,396
  121,046
  127,985
  135,227
  142,791
  150,692
  158,951
  167,585
  176,616
  186,066
  195,955
  206,309
  217,151
  228,507
  240,405
  252,873
  265,940
  279,638
Revenue / Adjusted assets
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
Average production assets, $m
  7,181
  7,778
  8,391
  9,028
  9,690
  10,378
  11,093
  11,837
  12,610
  13,414
  14,251
  15,122
  16,030
  16,977
  17,964
  18,993
  20,068
  21,191
  22,363
  23,589
  24,870
  26,211
  27,613
  29,081
  30,617
  32,226
  33,911
  35,677
  37,527
  39,467
  41,499
Working capital, $m
  2,520
  -7,122
  -7,684
  -8,267
  -8,873
  -9,503
  -10,158
  -10,838
  -11,546
  -12,283
  -13,049
  -13,847
  -14,678
  -15,545
  -16,449
  -17,392
  -18,376
  -19,404
  -20,477
  -21,599
  -22,773
  -24,000
  -25,284
  -26,628
  -28,035
  -29,508
  -31,051
  -32,668
  -34,362
  -36,138
  -37,999
Total debt, $m
  14,032
  12,991
  15,899
  18,921
  22,061
  25,325
  28,717
  32,243
  35,910
  39,725
  43,696
  47,830
  52,137
  56,627
  61,309
  66,193
  71,292
  76,617
  82,179
  87,993
  94,072
  100,430
  107,082
  114,044
  121,333
  128,966
  136,961
  145,337
  154,114
  163,314
  172,957
Total liabilities, $m
  37,940
  36,899
  39,807
  42,829
  45,969
  49,233
  52,625
  56,151
  59,818
  63,633
  67,604
  71,738
  76,045
  80,535
  85,217
  90,101
  95,200
  100,525
  106,087
  111,901
  117,980
  124,338
  130,990
  137,952
  145,241
  152,874
  160,869
  169,245
  178,022
  187,222
  196,865
Total equity, $m
  23,466
  15,514
  16,737
  18,008
  19,328
  20,700
  22,126
  23,609
  25,151
  26,755
  28,424
  30,163
  31,974
  33,861
  35,830
  37,884
  40,027
  42,266
  44,605
  47,049
  49,605
  52,278
  55,075
  58,003
  61,067
  64,277
  67,638
  71,160
  74,850
  78,718
  82,773
Total liabilities and equity, $m
  61,406
  52,413
  56,544
  60,837
  65,297
  69,933
  74,751
  79,760
  84,969
  90,388
  96,028
  101,901
  108,019
  114,396
  121,047
  127,985
  135,227
  142,791
  150,692
  158,950
  167,585
  176,616
  186,065
  195,955
  206,308
  217,151
  228,507
  240,405
  252,872
  265,940
  279,638
Debt-to-equity ratio
  0.598
  0.840
  0.950
  1.050
  1.140
  1.220
  1.300
  1.370
  1.430
  1.480
  1.540
  1.590
  1.630
  1.670
  1.710
  1.750
  1.780
  1.810
  1.840
  1.870
  1.900
  1.920
  1.940
  1.970
  1.990
  2.010
  2.020
  2.040
  2.060
  2.070
  2.090
Adjusted equity ratio
  0.234
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  344
  3,014
  3,301
  3,600
  3,910
  4,233
  4,568
  4,917
  5,279
  5,656
  6,049
  7,736
  8,162
  8,606
  9,069
  9,552
  10,056
  10,583
  11,133
  11,709
  12,310
  12,940
  13,598
  14,287
  15,009
  15,764
  16,556
  17,385
  18,254
  19,165
  20,120
Depreciation, amort., depletion, $m
  3,051
  2,736
  2,814
  2,894
  2,978
  3,065
  3,156
  3,250
  3,348
  3,450
  3,556
  1,914
  2,029
  2,149
  2,274
  2,404
  2,540
  2,682
  2,831
  2,986
  3,148
  3,318
  3,495
  3,681
  3,876
  4,079
  4,293
  4,516
  4,750
  4,996
  5,253
Funds from operations, $m
  -2,537
  5,751
  6,115
  6,495
  6,889
  7,298
  7,724
  8,166
  8,627
  9,106
  9,604
  9,650
  10,191
  10,755
  11,343
  11,956
  12,597
  13,265
  13,964
  14,695
  15,458
  16,257
  17,093
  17,968
  18,884
  19,844
  20,848
  21,901
  23,005
  24,161
  25,373
Change in working capital, $m
  -3,426
  -540
  -561
  -583
  -606
  -630
  -655
  -681
  -708
  -736
  -766
  -798
  -831
  -867
  -904
  -943
  -984
  -1,028
  -1,074
  -1,122
  -1,173
  -1,227
  -1,284
  -1,344
  -1,407
  -1,473
  -1,543
  -1,617
  -1,694
  -1,776
  -1,861
Cash from operations, $m
  889
  6,290
  6,677
  7,078
  7,495
  7,928
  8,379
  8,847
  9,335
  9,842
  10,370
  10,448
  11,022
  11,621
  12,246
  12,899
  13,581
  14,293
  15,038
  15,817
  16,632
  17,485
  18,377
  19,312
  20,291
  21,317
  22,392
  23,518
  24,699
  25,937
  27,235
Maintenance CAPEX, $m
  0
  -909
  -985
  -1,062
  -1,143
  -1,227
  -1,314
  -1,404
  -1,498
  -1,596
  -1,698
  -1,804
  -1,914
  -2,029
  -2,149
  -2,274
  -2,404
  -2,540
  -2,682
  -2,831
  -2,986
  -3,148
  -3,318
  -3,495
  -3,681
  -3,876
  -4,079
  -4,293
  -4,516
  -4,750
  -4,996
New CAPEX, $m
  -3,137
  -598
  -613
  -637
  -662
  -688
  -715
  -743
  -773
  -804
  -837
  -872
  -908
  -946
  -987
  -1,030
  -1,075
  -1,122
  -1,173
  -1,226
  -1,281
  -1,340
  -1,402
  -1,468
  -1,537
  -1,609
  -1,685
  -1,766
  -1,850
  -1,939
  -2,033
Cash from investing activities, $m
  -4,907
  -1,507
  -1,598
  -1,699
  -1,805
  -1,915
  -2,029
  -2,147
  -2,271
  -2,400
  -2,535
  -2,676
  -2,822
  -2,975
  -3,136
  -3,304
  -3,479
  -3,662
  -3,855
  -4,057
  -4,267
  -4,488
  -4,720
  -4,963
  -5,218
  -5,485
  -5,764
  -6,059
  -6,366
  -6,689
  -7,029
Free cash flow, $m
  -4,018
  4,784
  5,079
  5,379
  5,690
  6,014
  6,350
  6,700
  7,063
  7,442
  7,835
  7,773
  8,200
  8,646
  9,110
  9,595
  10,102
  10,630
  11,183
  11,761
  12,364
  12,996
  13,657
  14,349
  15,074
  15,832
  16,627
  17,460
  18,332
  19,247
  20,206
Issuance/(repayment) of debt, $m
  -1,506
  2,809
  2,908
  3,022
  3,141
  3,264
  3,392
  3,526
  3,667
  3,815
  3,971
  4,134
  4,307
  4,490
  4,682
  4,885
  5,099
  5,325
  5,563
  5,814
  6,079
  6,358
  6,652
  6,962
  7,289
  7,633
  7,995
  8,376
  8,777
  9,199
  9,643
Issuance/(repurchase) of shares, $m
  -2,145
  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  
  1,038
  2,809
  2,908
  3,022
  3,141
  3,264
  3,392
  3,526
  3,667
  3,815
  3,971
  4,134
  4,307
  4,490
  4,682
  4,885
  5,099
  5,325
  5,563
  5,814
  6,079
  6,358
  6,652
  6,962
  7,289
  7,633
  7,995
  8,376
  8,777
  9,199
  9,643
Total cash flow (excl. dividends), $m
  -2,980
  7,593
  7,987
  8,401
  8,831
  9,277
  9,742
  10,226
  10,730
  11,257
  11,806
  11,907
  12,507
  13,135
  13,792
  14,480
  15,200
  15,955
  16,746
  17,574
  18,443
  19,354
  20,309
  21,311
  22,362
  23,465
  24,622
  25,836
  27,110
  28,446
  29,849
Retained Cash Flow (-), $m
  7,982
  -1,155
  -1,223
  -1,271
  -1,320
  -1,372
  -1,426
  -1,483
  -1,542
  -1,604
  -1,669
  -1,738
  -1,811
  -1,888
  -1,968
  -2,054
  -2,144
  -2,239
  -2,339
  -2,444
  -2,556
  -2,673
  -2,797
  -2,927
  -3,065
  -3,209
  -3,361
  -3,522
  -3,690
  -3,868
  -4,055
Prev. year cash balance distribution, $m
 
  9,107
  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
 
  15,544
  6,764
  7,130
  7,510
  7,905
  8,316
  8,743
  9,188
  9,653
  10,137
  10,169
  10,696
  11,248
  11,824
  12,426
  13,057
  13,716
  14,407
  15,130
  15,887
  16,681
  17,512
  18,384
  19,298
  20,256
  21,260
  22,314
  23,419
  24,578
  25,795
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
 
  14,903
  6,192
  6,205
  6,184
  6,127
  6,035
  5,907
  5,743
  5,545
  5,314
  4,829
  4,565
  4,277
  3,969
  3,648
  3,318
  2,984
  2,653
  2,330
  2,019
  1,725
  1,453
  1,205
  983
  788
  620
  479
  362
  268
  194
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 76.1
Price to Sales 0.9
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 29.4
Price to Free Cash Flow -11.6
Growth Rates
Sales Growth Rate -4.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -4.4%
Cap. Spend. - 3 Yr. Gr. Rate -2.8%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 43.4%
Total Debt to Equity 59.8%
Interest Coverage 2
Management Effectiveness
Return On Assets 1.4%
Ret/ On Assets - 3 Yr. Avg. 3.3%
Return On Total Capital 0.8%
Ret/ On T. Cap. - 3 Yr. Avg. 4.3%
Return On Equity 1.3%
Return On Equity - 3 Yr. Avg. 6%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 30.1%
Gross Margin - 3 Yr. Avg. 31.6%
EBITDA Margin 12.9%
EBITDA Margin - 3 Yr. Avg. 20%
Operating Margin 2.2%
Oper. Margin - 3 Yr. Avg. 7.5%
Pre-Tax Margin 0.9%
Pre-Tax Margin - 3 Yr. Avg. 6.6%
Net Profit Margin 1.2%
Net Profit Margin - 3 Yr. Avg. 6.5%
Effective Tax Rate -60.3%
Eff/ Tax Rate - 3 Yr. Avg. -26.9%
Payout Ratio 124.4%

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 $28871 million for the last fiscal year's total revenue generated by Hewlett Packard Enterprise. The default revenue input number comes from 2017 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 8.2% 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 86.1%.

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 3.5% 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 24.9%.

Life of production assets of 7.9 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 -22.8%. 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 - $23466 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 1621.87 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 $26.6 billion.

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▶ Hewlett Packard Enterprise Declares a Regular Dividend   [Jan-18-18 07:45AM  GlobeNewswire]
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▶ HPE Taps AMD For ProLiant DL385, Again   [Dec-08-17 08:00AM  Forbes]
Financial statements of HPE
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