Hewlett Packard Enterprise Company (HPE) DCF Valuation & Fundamental Primer
Hewlett Packard Enterprise Company (HPE) currently trades at $24.13 with an enterprise value of $31.78B. Our proprietary institutional model rates Hewlett Packard Enterprise Company at 77/100 (Grade: A · High-Quality Compounder). The current market price prices in an implied 5-year revenue CAGR of 27.8% vs. historical growth of 28.1% (Fairly Priced to Fundamentals).
Institutional fundamental teardown of Hewlett Packard Enterprise Company (HPE) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Hewlett Packard Enterprise Company (HPE) 3-Scenario DCF Valuation Range
Stress-test HPE's 5-year growth, target FCF margin, WACC, terminal methodology, and SBC/dilution friction in real time.
Split between 5-Year Explicit Cash Flows and Discounted Terminal Value
2D Institutional Valuation Sensitivity Heatmap
Implied share price & upside/downside spread across 25 valuation states (Current Price: $24.13).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $27.22 +13% | $28.98 +20% | $31.03 +29% | $33.45 +39% | $36.36 +51% |
| 9.3% | $24.37 +1% | $25.76 +7% | $27.35 +13% | $29.19 +21% | $31.36 +30% |
| 10.0% | $22.04 -9% | $23.15 -4% | $24.41 +1% | $25.85 +7% | $27.52 +14% |
| 10.8% | $20.09 -17% | $21.00 -13% | $22.02 -9% | $23.17 -4% | $24.48 +1% |
| 11.5% | $18.43 -24% | $19.19 -20% | $20.02 -17% | $20.96 -13% | $22.02 -9% |
Institutional Software Quality Scorecard (77/100 · Grade A)
Strong fundamentals, above-average cash generation, and robust competitive positioning.
Elite deferred revenue float; FCF exceeds operating income by >20%
Elevated equity dilution; SBC consumes substantial operating cash flow
High-quality software margins with healthy balanced growth and profitability
Positive net cash cushion; self-funding operations with zero insolvency risk
Core Investment Strengths & Moats
- High-grade cash conversion: FCF is 312% of EBIT driven by upfront annual collections
- Healthy unit economics: 72.7% gross margin
- Net cash positive: $541.4M balance sheet buffer
Key Operational & Dilution Risks
- Substantial SBC dilution drag: SBC is 19.7% of revenue ($662.5M)
Reverse-DCF Solver: What Growth is Priced Into HPE?
Market implies 27.8% annual revenue growth over next 5 years (44.7% dilution-adjusted), in line with company run-rate.
Headline Reverse-DCF ignores Stock-Based Compensation (19.7% of revenue) and annual share dilution (1.8%/yr). Accounting for both requires 44.7% 5-year revenue CAGR to justify $24.13/sh on a true per-share economic cash flow basis.
Hewlett Packard Enterprise Company (HPE) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $3.36B | $3.36B | $4.31B | $5.52B | $7.07B | $9.06B | $11.60B |
| Gross Profit | $2.44B | $2.44B | $3.13B | $4.01B | $5.14B | $6.58B | $8.43B |
| Operating Income (EBIT) | $272.4M | $272.4M | $348.9M | $447.0M | $572.6M | $733.5M | $939.6M |
| Stock-Based Compensation (SBC) | $662.5M | $662.5M | $848.7M | $1.09B | $1.39B | $1.78B | $2.29B |
| Unlevered Free Cash Flow (FCF) | $850.8M | $850.8M | $1.09B | $1.40B | $1.79B | $2.29B | $2.93B |
| SBC-Adjusted True Cash Flow | $188.3M | $188.3M | $241.2M | $309.0M | $395.9M | $507.1M | $649.6M |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -29.3 + 0.79 × (Rule of 40) · R² = 73%Stocks below the gold regression line trade at a discount relative to their Rule of 40 compounding efficiency.
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| Hewlett Packard Enterprise Company | HPE | $31.95B | $3.36B | 72.7% | 25.3% | 53.4% | 19.7% | 9.3× |
| ServiceNow | NOW | $152.61B | $10.98B | 79.2% | 31.1% | 54.2% | 15.9% | 13.9× |
| Workday, Inc. | WDAY | $50.35B | $8.00B | 75.0% | 27.4% | 43.9% | 19.0% | 6.4× |
| Salesforce | CRM | $217.10B | $37.90B | 77.2% | 32.8% | 42.8% | 8.4% | 5.8× |
| Datadog | DDOG | $46.05B | $2.68B | 80.8% | 31.1% | 57.7% | 21.3% | 17.4× |
| Snowflake Inc. | SNOW | $71.79B | $3.63B | 66.5% | 25.2% | 57.7% | 40.8% | 20.0× |
| Hubspot | HUBS | $19.89B | $2.63B | 85.0% | 21.3% | 52.7% | 19.2% | 7.7× |
| Peer Cohort Median Benchmark (N=6) | 78.2% | 29.2% | 53.5% | 19.1% | 10.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 9.3× | $31.41B | $31.95B | $24.13 | 0.0% |
| -20% Multiple Compression | 7.5× | $25.13B | $25.67B | $19.39 | -20.0% |
| -35% Multiple Compression | 6.1× | $20.41B | $20.96B | $15.83 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $16.82B | $17.36B | $13.11 | -46.5% |
Frequently Asked Questions: Hewlett Packard Enterprise Company (HPE) Valuation
What is Hewlett Packard Enterprise Company (HPE)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, Hewlett Packard Enterprise Company (HPE) has a Base Case implied value of $24.41 per share (with a Bear Case of $9.40 and a Bull Case of $47.36), compared to its current price of $24.13. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Hewlett Packard Enterprise Company (HPE)'s Rule of 40 score and Free Cash Flow margin?
Hewlett Packard Enterprise Company achieves a Rule of 40 score of 53.4%, combining a 28.1% revenue growth run-rate with a 25.3% TTM free cash flow margin on $3.36B in trailing twelve-month revenue. In the Software & Cloud Services peer cohort, the median Rule of 40 benchmark is 53.5%.
What revenue growth rate is priced into HPE stock according to Reverse-DCF analysis?
At $24.13 per share (Enterprise Value of $31.41B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 27.8%, compared to Hewlett Packard Enterprise Company's historical CAGR of 28.1%. Overall market expectations are rated as "Fairly Priced to Fundamentals".
How does Hewlett Packard Enterprise Company compare to Software & Cloud Services software peers?
Hewlett Packard Enterprise Company (HPE) earns an institutional Software Quality Score of 77/100 (Grade A — High-Quality Compounder). Across its Software & Cloud Services peer group (NOW, WDAY, CRM, DDOG, SNOW), the cohort trades at a median EV/TTM Revenue multiple of 10.8× and a median gross margin of 78.2%.
How does Stock-Based Compensation (SBC) impact Hewlett Packard Enterprise Company (HPE)'s valuation?
Hewlett Packard Enterprise Company recorded $662.5M in TTM stock-based compensation (19.7% of revenue). When treating SBC as a cash-equivalent compensation expense, Hewlett Packard Enterprise Company's SBC-adjusted free cash flow yield is 0.6%, scoring 10/25 on our Shareholder Dilution Friction pillar.