Hewlett Packard Enterprise Co Valuation – March 2019 #HPE

Company Profile (excerpt from Reuters): Hewlett Packard Enterprise Company, incorporated on February 25, 2015, 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. The Company’s customers range from small and medium-sized businesses (SMBs) to large global enterprises.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HPE – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $21,727,342,562 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.94 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -137.37% Fail
6. Moderate PEmg Ratio PEmg < 20 12.98 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.22 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.94 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -10.01 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.22
MG Growth Estimate 15.00%
MG Value $47.05
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $17.72
MG Value based on 0% Growth $10.39
Market Implied Growth Rate 2.24%
Current Price $15.86
% of Intrinsic Value 33.71%

Hewlett Packard Enterprise Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-0.2 in 2015 to an estimated $1.22 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.24% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Hewlett Packard Enterprise Co revealed the company was trading below its Graham Number of $22.89. The company pays a dividend of $0.38 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.98, which was below the industry average of 35.5, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.74.

Hewlett Packard Enterprise Co performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.74
Graham Number $22.89
PEmg 12.98
Current Ratio 0.94
PB Ratio 1.22
Current Dividend $0.38
Dividend Yield 2.36%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2019
Total Current Assets $15,432,000,000
Total Current Liabilities $16,459,000,000
Long-Term Debt $10,280,000,000
Total Assets $51,758,000,000
Intangible Assets $18,334,000,000
Total Liabilities $33,423,000,000
Shares Outstanding (Diluted Average) 1,412,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.56
Oct2018 $1.23
Oct2017 $0.21
Oct2016 $1.82
Oct2015 $1.34
Oct2014 $0.75
Oct2013 $1.12
Oct2012 -$8.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.22
Oct2018 $1.06
Oct2017 $1.00
Oct2016 $0.73
Oct2015 -$0.20
Oct2014 -$1.06
Oct2013 -$1.77
Oct2012 -$2.68

Recommended Reading:

Other ModernGraham posts about the company

Hewlett Packard Enterprise Co Valuation – June 2018 $HPE
Hewlett Packard Enterprise Co Valuation – Initial Valuation $HPE

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IPG Photonics Corp Valuation – March 2019 #IPGP
Micron Technology Inc Valuation – March 2019 #MU
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Xilinx Inc Valuation – March 2019 #XLNX
Western Digital Corp Valuation – March 2019 #WDC
Texas Instruments Inc Valuation – March 2019 #TXN
Qualcomm Inc Valuation – March 2019 #QCOM
Ametek Inc Valuation – March 2019 #AME

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Microchip Technology Inc Valuation – February 2019 $MCHP

Company Profile (excerpt from Reuters): Microchip Technology Incorporated, incorporated on February 14, 1989, is engaged in developing, manufacturing and selling specialized semiconductor products used by its customers for a range of embedded control applications. The Company operates through two segments: semiconductor products and technology licensing. In the semiconductor products segment, the Company designs, develops, manufactures and markets microcontrollers, development tools and analog, interface, mixed signal and timing products. Its functional activities include sales, marketing, manufacturing, information technology, human resources, legal and finance.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MCHP – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $19,559,376,278 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.04 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 3.23% Fail
6. Moderate PEmg Ratio PEmg < 20 44.65 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.03 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.04 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 108.41 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.85
MG Growth Estimate 3.24%
MG Value $27.76
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $26.85
MG Value based on 0% Growth $15.74
Market Implied Growth Rate 18.08%
Current Price $82.70
% of Intrinsic Value 297.92%

Microchip Technology Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.52 in 2015 to an estimated $1.85 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 18.08% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Microchip Technology Inc. revealed the company was trading above its Graham Number of $32.58. The company pays a dividend of $1.45 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 44.65, which was above the industry average of 29.46. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-44.96.

Microchip Technology Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$44.96
Graham Number $32.58
PEmg 44.65
Current Ratio 1.04
PB Ratio 4.03
Current Dividend $1.45
Dividend Yield 1.75%
Number of Consecutive Years of Dividend Growth 17

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $2,176,200,000
Total Current Liabilities $2,088,100,000
Long-Term Debt $9,551,100,000
Total Assets $18,667,100,000
Intangible Assets $13,613,400,000
Total Liabilities $13,496,900,000
Shares Outstanding (Diluted Average) 251,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.38
Mar2018 $1.03
Mar2017 $0.71
Mar2016 $1.49
Mar2015 $1.65
Mar2014 $1.82
Mar2013 $0.62
Mar2012 $1.65
Mar2011 $2.15
Mar2010 $1.16
Mar2009 $1.31
Mar2008 $1.40
Mar2007 $1.62
Mar2006 $1.13
Mar2005 $1.01
Mar2004 $0.65
Mar2003 $0.42
Mar2002 $0.45
Mar2001 $0.70
Mar2000 $0.59
Mar1999 $0.24

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.85
Mar2018 $1.17
Mar2017 $1.25
Mar2016 $1.49
Mar2015 $1.52
Mar2014 $1.47
Mar2013 $1.32
Mar2012 $1.62
Mar2011 $1.58
Mar2010 $1.31
Mar2009 $1.35
Mar2008 $1.30
Mar2007 $1.16
Mar2006 $0.86
Mar2005 $0.70
Mar2004 $0.55
Mar2003 $0.49

Recommended Reading:

Other ModernGraham posts about the company

Microchip Technology Inc Valuation – April 2018 $MCHP
Microchip Technology Inc Valuation – July 2016 $MCHP
Microchip Technology Inc Valuation – January 2016 Update $MCHP
Microchip Technology Inc. Analysis – September 2015 Update $MCHP
Microchip Technology Stock Valuation – May 2015 Quarterly Update $MCHP

Other ModernGraham posts about related companies

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TE Connectivity Ltd Valuation – January 2019 $TEL
NVIDIA Corp Valuation – January 2019 $NVDA
Seagate Technology PLC Valuation – January 2019 $STX
Corning Inc Valuation – January 2019 $GLW
HP Inc Valuation – December 2018 $HPQ
Intel Corp Valuation – November 2018 $INTC
Apple Inc Valuation – November 2018 $AAPL
Littelfuse Inc Valuation – September 2018 $LFUS
CTS Corporation Valuation – August 2018 $CTS

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Helmerich & Payne Inc Valuation – January 2019 $HP

Company Profile (excerpt from Reuters): Helmerich & Payne, Inc., incorporated on February 29, 1944, is engaged in contract drilling of oil and gas wells for others. The Company operates in the contract drilling industry. The Company’s contract drilling business consists of three segments: U.S. Land, Offshore and International Land. The Company is also engaged in the ownership, development and operation of commercial real estate and the research and development of rotary steerable technology. Its real estate investments are located within Tulsa, Oklahoma, and include a shopping center containing approximately 441,000 leasable square feet, multi-tenant industrial warehouse properties containing approximately one million leasable square feet and approximately 210 acres of undeveloped real estate. The Company’s subsidiaries include Helmerich & Payne International Drilling Co. and Helmerich & Payne de Venezuela, C.A.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HP – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,825,900,373 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.96 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -63.64% Fail
6. Moderate PEmg Ratio PEmg < 20 39.29 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.34 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.96 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.67 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.36
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $19.72
MG Value based on 0% Growth $11.56
Market Implied Growth Rate 15.39%
Current Price $53.43
% of Intrinsic Value N/A

Helmerich & Payne, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $5.34 in 2015 to an estimated $1.36 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.39% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Helmerich & Payne, Inc. revealed the company was trading above its Graham Number of $26.06. The company pays a dividend of $2.81 per share, for a yield of 5.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 39.29, which was below the industry average of 41.28, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-6.54.

Helmerich & Payne, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$6.54
Graham Number $26.06
PEmg 39.29
Current Ratio 2.96
PB Ratio 1.34
Current Dividend $2.81
Dividend Yield 5.26%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

 

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $1,115,550,000
Total Current Liabilities $377,168,000
Long-Term Debt $493,968,000
Total Assets $6,214,867,000
Intangible Assets $137,984,000
Total Liabilities $1,832,132,000
Shares Outstanding (Diluted Average) 109,534,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.75
Sep2018 $4.37
Sep2017 -$1.20
Sep2016 -$0.54
Sep2015 $3.85
Sep2014 $6.44
Sep2013 $6.79
Sep2012 $5.34
Sep2011 $3.99
Sep2010 $1.45
Sep2009 $3.31
Sep2008 $4.34
Sep2007 $4.27
Sep2006 $2.77
Sep2005 $0.62
Sep2004 $0.05
Sep2003 $0.09
Sep2002 $0.27
Sep2001 $0.79
Sep2000 $0.82
Sep1999 $0.43

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.36
Sep2018 $1.97
Sep2017 $1.54
Sep2016 $3.40
Sep2015 $5.34
Sep2014 $5.65
Sep2013 $4.90
Sep2012 $3.86
Sep2011 $3.24
Sep2010 $2.99
Sep2009 $3.53
Sep2008 $3.22
Sep2007 $2.30
Sep2006 $1.13
Sep2005 $0.32
Sep2004 $0.25
Sep2003 $0.40

Recommended Reading:

Other ModernGraham posts about the company

Helmerich & Payne Inc Valuation – March 2018 $HP
Helmerich & Payne Inc Valuation – June 2016 $HP
Helmerich & Payne Inc Valuation – November 2015 Update $HP
Dividend Growth Stocks for the Intelligent Investor – November 2015
10 Undervalued Companies for the Defensive Dividend Stock Investor – November 2015

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Carbo Ceramics Inc Valuation – August 2018 $CRR
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Tidewater Inc Valuation – August 2018 $TDW
Carrizo Oil & Gas Inc Valuation – August 2018 $CRZO

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

HP Inc Valuation – December 2018 $HPQ

Company Profile (excerpt from Reuters): HP Inc., incorporated on February 11, 1998, is a provider of products, technologies, software, solutions and services to individual consumers, small- and medium-sized businesses (SMBs), and large enterprises, including customers in the government, health and education sectors. The Company provides personal computing and other access devices, imaging and printing products, and related technologies, solutions and services. The Company’s segments include Personal Systems, Printing and Corporate Investments. The Personal Systems segment provides Commercial personal computers (PCs), Consumer PCs, workstations, thin clients, Commercial tablets and mobility devices, retail point-of-sale (POS) systems, displays and other related accessories, software, support and services for the commercial and consumer markets. The Printing segment provides consumer and commercial printer hardware, supplies, media, solutions and services, as well as scanning devices. The Corporate Investments segment includes the operations of HP Labs and certain business incubation projects.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HPQ – December 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $38,294,144,118 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.85 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 1043.33% Pass
6. Moderate PEmg Ratio PEmg < 20 10.43 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -58.12 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.85 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.21 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.23
MG Growth Estimate 8.60%
MG Value $57.27
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $32.31
MG Value based on 0% Growth $18.94
Market Implied Growth Rate 0.97%
Current Price $23.24
% of Intrinsic Value 40.58%

HP Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.42 in 2015 to an estimated $2.23 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.97% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into HP Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.56 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.43, which was below the industry average of 36.27, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-8.68.

HP Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$8.68
Graham Number $0.00
PEmg 10.43
Current Ratio 0.85
PB Ratio -58.12
Current Dividend $0.56
Dividend Yield 2.40%
Number of Consecutive Years of Dividend Growth 2

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 10/1/2018
Total Current Assets $21,387,000,000
Total Current Liabilities $25,131,000,000
Long-Term Debt $4,524,000,000
Total Assets $34,622,000,000
Intangible Assets $5,968,000,000
Total Liabilities $35,261,000,000
Shares Outstanding (Diluted Average) 1,598,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.12
Oct2018 $3.26
Oct2017 $1.48
Oct2016 $1.43
Oct2015 $2.48
Oct2014 $2.62
Oct2013 $2.62
Oct2012 -$6.41
Oct2011 $3.32
Oct2010 $3.69
Oct2009 $3.14
Oct2008 $3.25
Oct2007 $2.68
Oct2006 $2.18
Oct2005 $0.82
Oct2004 $1.15
Oct2003 $0.83
Oct2002 -$0.36
Oct2001 $0.21
Oct2000 $1.80
Oct1999 $1.67

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.23
Oct2018 $2.27
Oct2017 $1.89
Oct2016 $1.58
Oct2015 $1.42
Oct2014 $0.98
Oct2013 $0.53
Oct2012 $0.12
Oct2011 $3.33
Oct2010 $3.22
Oct2009 $2.79
Oct2008 $2.42
Oct2007 $1.85
Oct2006 $1.26
Oct2005 $0.71
Oct2004 $0.68
Oct2003 $0.57

Recommended Reading:

Other ModernGraham posts about the company

HP Inc Valuation – February 2018 $HPQ
HP Inc Valuation – May 2016 $HPQ
58 Companies in the Spotlight This Week – 1/31/15
Hewlett-Packard Corporation Annual Valuation – 2015 $HPQ
14 Companies in the Spotlight This Week – 1/18/14

Other ModernGraham posts about related companies

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Littelfuse Inc Valuation – September 2018 $LFUS
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Kopin Corp Valuation – August 2018 $KOPN
Knowles Corp Valuation – August 2018 $KN
Cree Inc Valuation – August 2018 $CREE
Cray Inc Valuation – August 2018 $CRAY
Kulicke & Soffa Industries Inc Valuation – August 2018 $KLIC
Keysight Technologies Inc Valuation – August 2018 $KEYS

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Hewlett Packard Enterprise Co Valuation – June 2018 $HPE

Company Profile (excerpt from Reuters): Hewlett Packard Enterprise Company, incorporated on February 25, 2015, 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. The Company’s customers range from small and medium-sized businesses (SMBs) to large global enterprises.

HPE Chart

HPE data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HPE – June 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $24,866,810,356 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.04 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 13733.33% Pass
6. Moderate PEmg Ratio PEmg < 20 11.73 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.06 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.04 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 14.08 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.37
MG Growth Estimate 15.00%
MG Value $52.57
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $19.80
MG Value based on 0% Growth $11.61
Market Implied Growth Rate 1.61%
Current Price $16.01
% of Intrinsic Value 30.46%

Hewlett Packard Enterprise Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.3 in 2014 to an estimated $1.37 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.61% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Hewlett Packard Enterprise Co revealed the company was trading below its Graham Number of $26.29. The company pays a dividend of $0.26 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 11.73, which was below the industry average of 55.37, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-10.19.

Hewlett Packard Enterprise Co receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$10.19
Graham Number $26.29
PEmg 11.73
Current Ratio 1.04
PB Ratio 1.06
Current Dividend $0.26
Dividend Yield 1.62%
Number of Consecutive Years of Dividend Growth 2

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 4/1/2018
Total Current Assets $19,792,000,000
Total Current Liabilities $19,084,000,000
Long-Term Debt $9,970,000,000
Total Assets $59,876,000,000
Intangible Assets $18,444,000,000
Total Liabilities $35,910,000,000
Shares Outstanding (Diluted Average) 1,582,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.12
Oct2017 $0.21
Oct2016 $1.82
Oct2015 $1.34
Oct2014 $0.90

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.37
Oct2017 $0.94
Oct2016 $1.14
Oct2015 $0.69
Oct2014 $0.30

Recommended Reading:

Other ModernGraham posts about the company

Hewlett Packard Enterprise Co Valuation – Initial Valuation $HPE

Other ModernGraham posts about related companies

Fortive Corp Valuation – June 2018 $FTV
Analog Devices Inc Valuation – June 2018 $ADI
IPG Photonics Corp Valuation – June 2018 $IPGP
Micron Technology Inc Valuation – May 2018 $MU
Amphenol Corp Valuation – May 2018 $APH
Xilinx Inc Valuation – May 2018 $XLNX
Western Digital Corp Valuation – May 2018 $WDC
Texas Instruments Inc Valuation – May 2018 $TXN
Qualcomm Inc Valuation – May 2018 $QCOM
Advanced Micro Devices Inc Valuation – May 2018 $AMD

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Microchip Technology Inc Valuation – April 2018 $MCHP

Company Profile (excerpt from Reuters): Microchip Technology Incorporated, incorporated on February 14, 1989, is engaged in developing, manufacturing and selling specialized semiconductor products used by its customers for a range of embedded control applications. The Company operates through two segments: semiconductor products and technology licensing. In the semiconductor products segment, the Company designs, develops, manufactures and markets microcontrollers, development tools and analog, interface, mixed signal and timing products. Its functional activities include sales, marketing, manufacturing, information technology, human resources, legal and finance.

MCHP Chart

MCHP data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MCHP – April 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,800,736,707 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.98 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -16.02% Fail
6. Moderate PEmg Ratio PEmg < 20 64.94 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.63 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.98 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.03 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.39
MG Growth Estimate -0.79%
MG Value $9.61
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $20.14
MG Value based on 0% Growth $11.80
Market Implied Growth Rate 28.22%
Current Price $90.18
% of Intrinsic Value 938.78%

Microchip Technology Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.47 in 2014 to an estimated $1.39 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 28.22% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Microchip Technology Inc. revealed the company was trading above its Graham Number of $23.23. The company pays a dividend of $1.44 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 64.94, which was above the industry average of 51.31. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-11.47.

Microchip Technology Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$11.47
Graham Number $23.23
PEmg 64.94
Current Ratio 2.98
PB Ratio 6.63
Current Dividend $1.44
Dividend Yield 1.60%
Number of Consecutive Years of Dividend Growth 15

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $2,253,441,000
Total Current Liabilities $756,832,000
Long-Term Debt $3,039,600,000
Total Assets $8,123,793,000
Intangible Assets $4,083,577,000
Total Liabilities $4,938,718,000
Shares Outstanding (Diluted Average) 234,106,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.68
Mar2017 $0.71
Mar2016 $1.49
Mar2015 $1.65
Mar2014 $1.82
Mar2013 $0.62
Mar2012 $1.65
Mar2011 $2.15
Mar2010 $1.16
Mar2009 $1.31
Mar2008 $1.40
Mar2007 $1.62
Mar2006 $1.13
Mar2005 $1.01
Mar2004 $0.65
Mar2003 $0.42
Mar2002 $0.45
Mar2001 $0.70
Mar2000 $0.59
Mar1999 $0.24
Mar1998 $0.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.39
Mar2017 $1.25
Mar2016 $1.49
Mar2015 $1.52
Mar2014 $1.47
Mar2013 $1.32
Mar2012 $1.62
Mar2011 $1.58
Mar2010 $1.31
Mar2009 $1.35
Mar2008 $1.30
Mar2007 $1.16
Mar2006 $0.86
Mar2005 $0.70
Mar2004 $0.55
Mar2003 $0.49
Mar2002 $0.51

Recommended Reading:

Other ModernGraham posts about the company

Microchip Technology Inc Valuation – January 2016 Update $MCHP
Microchip Technology Inc. Analysis – September 2015 Update $MCHP
Microchip Technology Stock Valuation – May 2015 Quarterly Update $MCHP
34 Companies in the Spotlight This Week – 2/7/15
Microchip Technology Inc. Quarterly Valuation – January 2015 $MCHP

Other ModernGraham posts about related companies

TE Connectivity Ltd Valuation – March 2018 $TEL
Juniper Networks Inc Valuation – March 2018 $JNPR
NVIDIA Corp Valuation – March 2018 $NVDA
Seagate Technology PLC Valuation – March 2018 $STX
HP Inc Valuation – February 2018 $HPQ
Intel Corp Valuation – February 2018 $INTC
Apple Inc Valuation – February 2018 $AAPL
Lam Research Corp Valuation – September 2017 $LRCX
Vicor Corp Valuation – Initial Coverage $VICR
Emerson Electric Co Valuation – August 2017 $EMR

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Helmerich & Payne Inc Valuation – March 2018 $HP

Company Profile (obtained from Marketwatch): Helmerich & Payne, Inc. engages in contract drilling of oil and gas well. It operates through the following segments: U.S. Land, Offshore, and International Land. The U.S. Land segment operates its drilling business primarily in Oklahoma, California, Texas, Wyoming, Colorado, Louisiana, Mississippi, Pennsylvania, Ohio, Utah, New Mexico, Montana, North Dakota, West Virginia and Nevada. The Offshore segment conducts its business in the Gulf of Mexico and Equatorial Guinea. The International Land segment operates in six international locations including Ecuador, Colombia, Argentina, Bahrain, United Arab Emirates, and Mozambique. The company was founded by Walter Helmerich II and William Payne in 1920 and is headquartered in Tulsa, OK.

HP Chart

HP data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HP – March 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $7,033,884,725 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.28 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -124.91% Fail
6. Moderate PEmg Ratio PEmg < 20 175.57 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.54 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.28 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.61 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.37
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $5.34
MG Value based on 0% Growth $3.13
Market Implied Growth Rate 83.54%
Current Price $64.61
% of Intrinsic Value N/A

Helmerich & Payne, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $5.65 in 2014 to an estimated $0.37 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 83.54% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Helmerich & Payne, Inc. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $2.8 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 175.57, which was above the industry average of 104.43. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.55.

Helmerich & Payne, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$5.55
Graham Number $0.00
PEmg 175.57
Current Ratio 3.28
PB Ratio 1.54
Current Dividend $2.80
Dividend Yield 4.33%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $1,166,346,000
Total Current Liabilities $355,762,000
Long-Term Debt $493,168,000
Total Assets $6,362,096,000
Intangible Assets $147,983,000
Total Liabilities $1,771,746,000
Shares Outstanding (Diluted Average) 109,095,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.44
Sep2017 -$1.20
Sep2016 -$0.54
Sep2015 $3.85
Sep2014 $6.44
Sep2013 $6.79
Sep2012 $5.34
Sep2011 $3.99
Sep2010 $1.45
Sep2009 $3.31
Sep2008 $4.34
Sep2007 $4.27
Sep2006 $2.77
Sep2005 $1.23
Sep2004 $0.05
Sep2003 $0.18
Sep2002 $0.53
Sep2001 $0.79
Sep2000 $0.82
Sep1999 $0.43
Sep1998 $1.00

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.37
Sep2017 $1.54
Sep2016 $3.40
Sep2015 $5.34
Sep2014 $5.65
Sep2013 $4.90
Sep2012 $3.86
Sep2011 $3.24
Sep2010 $2.99
Sep2009 $3.57
Sep2008 $3.31
Sep2007 $2.43
Sep2006 $1.32
Sep2005 $0.58
Sep2004 $0.33
Sep2003 $0.50
Sep2002 $0.68

Recommended Reading:

Other ModernGraham posts about the company

Helmerich & Payne Inc Valuation – November 2015 Update $HP
Dividend Growth Stocks for the Intelligent Investor – November 2015
10 Undervalued Companies for the Defensive Dividend Stock Investor – November 2015
10 Companies Benjamin Graham Would Invest In Today – October 2015
Dividend Growth Stocks for the Intelligent Investor – October 2015

Other ModernGraham posts about related companies

Williams Companies Inc Valuation – March 2018 $WMB
Exxon Mobil Corp Valuation – February 2018 $XOM
Chevron Corp Valuation – February 2018 $CVX
Seven Generations Energy Ltd Valuation – Initial Coverage $TSE:VII
Pioneer Natural Resources Valuation – September 2017 $PXD
Gulfport Energy Corp Valuation – Initial Coverage $GPOR
Schlumberger Limited Valuation – July 2017 $SLB
Tesco Corporation (USA) Valuation – Initial Coverage $TESO
Southwestern Energy Company Valuation – July 2017 $SWN
Apache Corp Valuation – April 2017 $APA

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

HP Inc Valuation – February 2018 $HPQ

Company Profile (obtained from Marketwatch): HP Inc. provides personal computing and other access devices, imaging and printing products, and related technologies, solutions and services to individual consumers, small and medium-sized businesses and large enterprises, including customers in the government, health and education sectors. It operates through following business segments: Personal Systems, Printing, and Corporate Investments. The Personal Systems segment offers Commercial personal computers, Consumer PCs, Workstations, thin clients, Commercial tablets and mobility devices, retail point-of-sale systems, displays and other related accessories, support, and services for the commercial and consumer markets. The Printing segment provides consumer and commercial printer hardware, supplies, media, solutions and services, as well as scanning devices. The Corporate Investments segment includes HP Labs and certain business incubation projects. The company was founded by William R. Hewlett and David Packard in January 1939 and is headquartered in Palo Alto, CA.

HPQ Chart

HPQ data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HPQ – February 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $38,695,774,462 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.91 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -54.29% Fail
6. Moderate PEmg Ratio PEmg < 20 13.34 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -14.32 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.91 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.97 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.76
MG Growth Estimate 12.02%
MG Value $57.34
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $25.56
MG Value based on 0% Growth $14.98
Market Implied Growth Rate 2.42%
Current Price $23.52
% of Intrinsic Value 41.02%

HP Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.98 in 2014 to an estimated $1.76 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.42% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into HP Inc revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.53 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.34, which was below the industry average of 41.95, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-10.05.

HP Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$10.05
Graham Number $0.00
PEmg 13.34
Current Ratio 0.91
PB Ratio -14.32
Current Dividend $0.53
Dividend Yield 2.26%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2018
Total Current Assets $21,217,000,000
Total Current Liabilities $23,349,000,000
Long-Term Debt $6,340,000,000
Total Assets $35,245,000,000
Intangible Assets $5,935,000,000
Total Liabilities $37,987,000,000
Shares Outstanding (Diluted Average) 1,669,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.73
Oct2017 $1.48
Oct2016 $1.43
Oct2015 $2.48
Oct2014 $2.62
Oct2013 $2.62
Oct2012 -$6.41
Oct2011 $3.32
Oct2010 $3.69
Oct2009 $3.14
Oct2008 $3.25
Oct2007 $2.68
Oct2006 $2.18
Oct2005 $0.82
Oct2004 $1.15
Oct2003 $0.83
Oct2002 -$0.36
Oct2001 $0.21
Oct2000 $1.80
Oct1999 $1.67
Oct1998 $1.39

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.76
Oct2017 $1.89
Oct2016 $1.58
Oct2015 $1.42
Oct2014 $0.98
Oct2013 $0.53
Oct2012 $0.12
Oct2011 $3.33
Oct2010 $3.22
Oct2009 $2.79
Oct2008 $2.42
Oct2007 $1.85
Oct2006 $1.26
Oct2005 $0.71
Oct2004 $0.68
Oct2003 $0.57
Oct2002 $0.61

Recommended Reading:

Other ModernGraham posts about the company

Hewlett-Packard Company (HPQ) Annual Valuation
58 Companies in the Spotlight This Week – 1/31/15
Hewlett-Packard Corporation Annual Valuation – 2015 $HPQ
14 Companies in the Spotlight This Week – 1/18/14

Other ModernGraham posts about related companies

Intel Corp Valuation – February 2018 $INTC
Apple Inc Valuation – February 2018 $AAPL
Lam Research Corp Valuation – September 2017 $LRCX
Vicor Corp Valuation – Initial Coverage $VICR
Emerson Electric Co Valuation – August 2017 $EMR
General Cable Corporation Valuation – Initial Coverage $BGC
3D Systems Corp Valuation – Initial Coverage $DDD
Teradyne Inc Valuation – Initial Coverage $TER
Diebold Nixdorf Inc Valuation – Initial Coverage $DBD
Tech Data Corp Valuation – Initial Coverage $TECD

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Hewlett Packard Enterprise Co Valuation – Initial Valuation $HPE

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Hewlett Packard Enterprise Co (HPE) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Hewlett Packard Enterprise Company is a provider of technology solutions. The Company operates through five segments: Enterprise Group, Software, Enterprise Services, 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 Enterprise Services segment brings all of its solutions together through its consulting and support professionals. 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.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of HPE – March 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $38,574,688,072 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.18 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 25249900.00% Pass
6. Moderate PEmg Ratio PEmg < 20 15.35 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.25 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.18 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.20 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.50
MG Growth Estimate 15.00%
MG Value $57.88
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $21.80
MG Value based on 0% Growth $12.78
Market Implied Growth Rate 3.42%
Current Price $23.07
% of Intrinsic Value 39.86%

Hewlett Packard Enterprise Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0 in 2013 to an estimated $1.5 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.42% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Hewlett Packard Enterprise Co revealed the company was trading below its Graham Number of $28.37. The company pays a dividend of $0.23 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 15.35, which was below the industry average of 28.12, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-11.55.

Hewlett Packard Enterprise Co receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$11.55
Graham Number $28.37
PEmg 15.35
Current Ratio 1.18
PB Ratio 1.25
Current Dividend $0.23
Dividend Yield 1.00%
Number of Consecutive Years of Dividend Growth 2

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ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2017
Total Current Assets $25,525,000,000
Total Current Liabilities $21,686,000,000
Long-Term Debt $12,270,000,000
Total Assets $76,662,000,000
Intangible Assets $25,416,000,000
Total Liabilities $45,161,000,000
Shares Outstanding (Diluted Average) 1,700,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.89
Oct2016 $1.82
Oct2015 $1.34
Oct2014 $0.90

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.50
Oct2016 $1.14
Oct2015 $0.69
Oct2014 $0.30

Recommended Reading:

Other ModernGraham posts about the company

None. This is the first time ModernGraham has covered the company.

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Microchip Technology Inc Valuation – July 2016 $MCHP

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Microchip Technology Inc (MCHP) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Microchip Technology Incorporated is engaged in developing, manufacturing and selling specialized semiconductor products used by its customers for a range of embedded control applications. The Company operates through two segments: semiconductor products and technology licensing. In the semiconductor products segment, the Company designs, develops, manufactures and markets microcontrollers, development tools and analog, interface, mixed signal and timing products. Its functional activities include sales, marketing, manufacturing, information technology, human resources, legal and finance. Its product portfolio comprises general purpose and specialized 8-bit, 16-bit, and 32-bit microcontrollers, a spectrum of linear, mixed-signal, power management, thermal management, radio frequency (RF), timing, safety, security, wired connectivity and wireless connectivity devices, as well as serial electrically erasable programmable read-only memories (EEPROMs) and serial flash memories.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of MCHP – July 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,967,951,675 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 8.11 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 55.01% Pass
6. Moderate PEmg Ratio PEmg < 20 28.91 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.77 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 8.11 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.91 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

MCHP value chart July 2016

EPSmg $1.97
MG Growth Estimate 7.44%
MG Value $46.17
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $28.63
MG Value based on 0% Growth $16.78
Market Implied Growth Rate 10.20%
Current Price $57.08
% of Intrinsic Value 123.64%

Microchip Technology Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.32 in 2013 to an estimated $1.97 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.2% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

Microchip Technology Inc. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

MCHP charts July 2016

Net Current Asset Value (NCAV) -$1.47
Graham Number $26.18
PEmg 28.91
Current Ratio 8.11
PB Ratio 5.77
Current Dividend $1.43
Dividend Yield 2.51%
Number of Consecutive Years of Dividend Growth 15

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $3,096,713,000
Total Current Liabilities $382,009,000
Long-Term Debt $2,483,037,000
Total Assets $5,567,515,000
Intangible Assets $1,619,001,000
Total Liabilities $3,416,596,000
Shares Outstanding (Diluted Average) 217,388,000

Earnings Per Share History

Next Fiscal Year Estimate $2.89
Mar2016 $1.49
Mar2015 $1.65
Mar2014 $1.82
Mar2013 $0.62
Mar2012 $1.65
Mar2011 $2.15
Mar2010 $1.16
Mar2009 $1.33
Mar2008 $1.40
Mar2007 $1.62
Mar2006 $1.13
Mar2005 $1.01
Mar2004 $0.65
Mar2003 $0.42
Mar2002 $0.45
Mar2001 $0.69
Mar2000 $0.56
Mar1999 $0.28
Mar1998 $0.34
Mar1997 $0.28

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.97
Mar2016 $1.49
Mar2015 $1.52
Mar2014 $1.47
Mar2013 $1.32
Mar2012 $1.63
Mar2011 $1.59
Mar2010 $1.31
Mar2009 $1.36
Mar2008 $1.30
Mar2007 $1.16
Mar2006 $0.86
Mar2005 $0.70
Mar2004 $0.55
Mar2003 $0.49
Mar2002 $0.51
Mar2001 $0.50

Recommended Reading:

Other ModernGraham posts about the company

Microchip Technology Inc Valuation – January 2016 Update $MCHP
Microchip Technology Inc. Analysis – September 2015 Update $MCHP
Microchip Technology Stock Valuation – May 2015 Quarterly Update $MCHP
34 Companies in the Spotlight This Week – 2/7/15
Microchip Technology Inc. Quarterly Valuation – January 2015 $MCHP

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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