Hewlett Packard Enterprise Company (NYSE:HPE) and HP Inc. (NYSE:HPQ) are both Technology companies that recently hit new highs. The recent price action of these companies has left many investors wondering what actions to take. To determine if one is a better investment than the other, we will compare the two names across various metrics, including growth, profitability, risk, return, dividends, and valuation.
Hewlett Packard Enterprise Company (NYSE:HPE) operates in the Diversified Computer Systems segment of the Technology sector. The company has grown sales at a -4.30% annual rate over the past five years, putting it in the low growth category. HPE has a net profit margin of 0.30% and is more profitable than the average company in the Diversified Computer Systems industry. In terms of efficiency, HPE has an asset turnover ratio of 0.58. This figure represents the amount of revenue a company generates per dollar of assets. HPE’s financial leverage ratio is 1.44, which indicates that the company’s asset base is primarily funded by equity capital. Company’s return on equity, which is really just the product of the company’s profit margin, asset turnover, and financial leverage ratios, is 0.40%, which is worse than the Diversified Computer Systems industry average ROE.
Hewlett Packard Enterprise Company (HPE) pays out an annual dividend of 0.26 per share. At the current valuation, this equates to a dividend yield of 1.74%. The company has a payout ratio of 276.80%. HPE’s current dividend therefore should be sustainable. Stock’s free cash flow yield, which represents the amount of cash available to investors before dividends, expressed as a percentage of the stock price, is 0.27. All else equal, companies with higher FCF yields are viewed as cheaper. Company trades at a P/E ratio of 80.76 , and is more expensive than the average stock in the Diversified Computer Systems industry. The average investment recommendation for HPE, taken from a group of Wall Street Analysts, is 2.50, or a hold.
Over the past three months, Hewlett Packard Enterprise Company insiders have been net buyers, dumping a net of -4,083,980 shares. This implies that insiders have been feeling relatively bearish about the outlook for HPE. HP Inc. (NYSE:HPQ) operates in the Diversified Computer Systems segment of the Technology sector. HPQ has increased sales at a -17.60% CAGR over the past five years, and is considered a low growth stock. The company has a net profit margin of 4.70% and is more profitable than the average Diversified Computer Systems player. HPQ’s return on equity of -57.10% is worse than the Diversified Computer Systems industry average.
HP Inc. (HPQ) pays a dividend of 0.53, which translates to dividend yield of 2.60% based on the current price. Stock has a payout ratio of 37.50%. According to this ratio, HPQ should be able to continue making payouts at these levels. The company trades at a free cash flow yield of 4.31 and has a P/E of 14.69. Compared to the average company in the 12.38 space, HPQ is relatively expensive. The average analyst recommendation for HPQ is 2.10, or a buy.
HP Inc. insiders have sold a net of -2,240,628 shares during the past three months, which implies that the company’s top executives have been feeling bearish about the stock’s outlook. Finally, HPQ’s beta of 1.84 indicates that the stock has an below average level of market risk.
Hewlett Packard Enterprise Company (NYSE:HPQ) scores higher than HP Inc. (NYSE:HPE) on 10 of the 13 measures compared between the two companies. HPQ has the better fundamentals, scoring higher on profitability, efficiency and leverage metrics. HPQ’s dividend is more attractive. HPQ wins on valuation measures. HPQ has better insider activity and sentiment signals.