HP Enterprise (HPE) Hits 52-Week High, Can The Run Continue?

Shares of Hewlett Packard Enterprise (HPE) have been strong performers lately, with the stock up 20.4% over the past month. The stock hit a new 52-week high of $17.03 in the previous session. Hewlett Packard Enterprise has gained 28.2% since the start of the year compared to the 27% move for the Zacks Computer and Technology sector and the 31.2% return for the Zacks Computer - Integrated Systems industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 27, 2019, HP Enterprise reported EPS of $0.45 versus consensus estimate of $0.4 while it missed the consensus revenue estimate by 0.94%.

For the current fiscal year, HP Enterprise is expected to post earnings of $1.84 per share on $29.43 billion in revenues. Meanwhile, for the next fiscal year, the company is expected to earn $1.97 per share on $29.56 billion in revenues. This represents a year-over-year change of 5.9% and 0.42%, respectively.

Valuation Metrics

HP Enterprise may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

HP Enterprise has a Value Score of A. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 9.2X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 4.9X versus its peer group's average of 7.4X. Additionally, the stock has a PEG ratio of 1.25. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, HP Enterprise currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if HP Enterprise fits the bill. Thus, it seems as though HP Enterprise shares could have potential in the weeks and months to come.

How Does HP Enterprise Stack Up to the Competition?

Shares of HP Enterprise have been rising, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including NCR (NCR), Seagate Technology (NASDAQ:STX), and NetApp (NASDAQ:NTAP), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

The Zacks Industry Rank is in the top 30% of all the industries we have in our universe, so it looks like there are some nice tailwinds for HP Enterprise, even beyond its own solid fundamental situation.