Hewlett Packard Enterprise: Cloud Growth With a Juicy Dividend

Hewlett Packard Enterprise Co. (NYSE:HPE) is poised to ride the megatrends in edge computing, artificial intelligence and the hybrid cloud. The company has achieved four consecutive quarters of more than 20% order growth. In addition, the share price is up 89% since October 2021, despite the volatility.

Legendary trader Paul Tudor Jones (Trades, Portfolio) was buying shares in the fourth quarter of 2021 at the current price of approximately $15.

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• Lets dive into the company's business model, financials and valuation to discover if the stock is a good potential value opportunity.

  Business model

  Hewlett Packard Enterprise is a U.S. technology company that was founded in 2015 after being spun off from parent company Hewlett Packard. The company's business model is poised to ride the megatrends in data, cloud and connectivity. Its business units include:

  • Edge Computing (Intelligent Edge)

  • High Performance Computing & AI

  • Compute

  • Storage

  • Financial Services & Corporate Investments

  
  

  The company generates 67% of its revenue from outside the U.S. and is, therefore, a truly global company. In 2015, Hewlett Packard Enterprise acquired Aruba Networks for approximately $3 billion. Aruba is a leader in networking, which includes Wi-FI, switching and data center networking. The company is a key driver in Hewlett Packard Enterprise's technical success and high growth of the Edge Computing division.

  Growing Financials

  Hewlett Packard generated a substantial $27.9 billion of revenue in the trailing 12 months. This is an increase of 3.7% since 2020. However, in terms of the individual business units, growth is accelerating substantially. For instance, in the first quarter of 2022, the High Performance Computing, AI and Compute divisions all achieved product order growth of over 20% year over year, while the Edge Computing segment achieved more than 35% year-over-year growth.

  The company is also immensely profitable, achieving gross profit of $9.4 billion via a healthy 34% profit margin and net income of $3.7 billion. This enables a very healthy 3% dividend to be maintained easily.

  In terms of valuation, the company is fairly valued according to the GF Value Line, which analyzes the stock's valuation multiples historically as well as its past financial performance and future earnings projections.

  Final thoughts

  Hewlett Packard Enterprise is poised to ride the major megatrends. The company has achieved immense order growth and is producing strong revenue at high margins. After the recent 89% run-up in share price since October, the stock is now fairly valued at the current levels. Thus, I would personally be looking for a larger pullback before entering to give a margin of safety.

  This article first appeared on GuruFocus.