Hewlett Packard Enterprise Is 'Compelling' At Current Price, Deutsche Bank Says - Hewlett Packard (NYSE:HPE)

Recently, Deutsche Bank issued a company note on Hewlett Packard Enterprise Co HPE after recent analysis showed that the company may be undervalued relative to its peers. Currently, analysts at Deutsche Bank rate Hewlett Packard Enterprise as a Buy, while their price target has been lowered from $23 to $19.

Shern Scriber and Adrienne Colby, analysts at Deutsche Bank, wrote, "HPE remains one of our top picks given a compelling valuation, strong hardware franchise, and operating margin leverage from improvements in its services business. On virtually all metrics, HPE trades at a discount to peers, and we believe current valuations miss HPE's strong free cash flow generation as we move beyond split costs."

Justifications

Deutsche Bank analysts gave two key reasons why they see strength in Hewlett Packard:

1. Strong Cash Flow Deutsche Bank estimates that annual free cash flow generation is $3.5 billion, which after dividends suggests buybacks could add 21 percent in EPS accretion. Because Hewlett Packard trades at a 7.5x EV/FCF multiple, compared to peers who trade at a 10x multiple, the stock may be undervalued.

2. Growing Hardware Business

Analysts noted that Hewlett Packard is well positioned with consistent 6 percent year-over-year currency growth in their hardware segment. Analysts at Deutsche Bank believe that margins can continue to improve because of the company's leading market position and operational efficiency, which can bring further value to shareholders.

At the time of this publication, Hewlett Packard was seen trading at $13.12, down 1.13 percent on the day.

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