Hewlett Packard Enterprise (HPE) Deep Dive: Why We Own It

Watch: HPE: Fast Growth, Cheap Price

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Why We Own Hewlett Packard Enterprise (HPE)

Most of our holdings earn their place on growth or quality. HPE earns its place on a rarer combination: fast growth at a low price. In the most recent quarter, revenue grew 34% from a year earlier. That was the fastest in its direct competitive set. Yet the stock trades at about 14 times next year's expected earnings, against roughly 23 times for the broad Information Technology sector. That is close to a 40% discount to the sector.

Two more numbers stand out. Its PEG ratio is 0.7, below the sector median of 1.1. That means the growth on offer more than covers the multiple. The shares also returned about +159% over the past year, far ahead of the +46% sector median. Demand for AI server systems and six straight earnings beats re-rated the stock.

We are not glossing over the trade-off. HPE is a hardware business, so its margins sit well below software-heavy peers. Its gross margin is about 37%, versus 63% for its direct rivals. It also carries roughly $14 billion of net debt after acquiring Juniper Networks. Every figure here is read straight from primary filings and price data, as of 11 September 2026.

At a Glance

The tables below summarise HPE's scale and how it compares with two peer groups, all measured as of 11 September 2026. The first shows the company's own key figures. The second compares its growth, profitability, valuation and returns against its direct competitors and the broad sector.

Two peer sets sit behind the comparison. The direct competitive set is seven US-listed enterprise-infrastructure companies that sell against HPE: Dell (DELL), Cisco (CSCO), IBM, NetApp (NTAP), Pure Storage (PSTG), Arista Networks (ANET) and Super Micro (SMCI). None of these are Veloris Capital holdings. The broad sector is the top 70 US-listed Information Technology companies by market value. Both medians are computed from primary data on our own methodology.

The chart below adds our own position to that snapshot. It shows HPE's share price over the past four months, with our average entry price marked. Our average entry is about $53, and the position is up around 18% against that level. That is past performance on a live position, not a forecast.

A Cheap Price in an Expensive Sector

The technology sector is not cheap. The typical large IT company trades at about 23 times forward earnings and 30 times EV/EBITDA. HPE trades at 14 times earnings and 14 times EV/EBITDA. It is cheaper than its direct rivals too, which sit near 20 times earnings. Part of that gap is deserved, because HPE's margins are lower. But a discount of nearly 40% looks wide for a company growing revenue faster than the group.

The estimate picture has been improving. The chart below shows the consensus forecast for next year's earnings per share. That forecast has risen about 14% over the past 90 days. Most of the increase came after HPE's strong results in early September. Rising forecasts, rather than a single quarter's beat, are one of the signals our screen rewards.

The Business: Full-Stack Enterprise Infrastructure

HPE builds the physical and software backbone of corporate and government computing. Its products fall into a few groups. It sells servers, including the AI systems that large organisations use to train and run artificial-intelligence models. It sells data storage arrays. It sells networking equipment through its Aruba division, and it expanded that business by acquiring Juniper Networks in 2025. It also builds supercomputers through its Cray division, which powers many of the world's fastest research machines.

Its competitors rarely match the full range. Dell (DELL) is strong in servers and storage. Cisco (CSCO) and Arista Networks (ANET) compete in networking. NetApp (NTAP) and Pure Storage (PSTG) focus on storage. Few offer servers, storage, networking and supercomputing under one roof, wrapped in a single service contract. That breadth, plus GreenLake, its pay-as-you-go platform, makes HPE hard to replace once a customer has standardised on it.

“HPE's advantage is integration. It bundles servers, storage, networking and supercomputing into one platform, increasingly sold on subscription, which raises the cost of switching for a customer that has standardised on it.”

Profitability: Thinner Margins, Rising Fast

Profitability is HPE's weakest scorecard, and we treat it honestly. Its net margin of about 7% is roughly a third of the 20% sector median. Hardware simply earns less per dollar of sales than software. Interest on the Juniper financing and acquisition-related costs weigh on the reported GAAP figure as well.

The direction, though, is encouraging. The chart below shows quarterly revenue and gross margin together. Revenue has climbed from about $7.8B to $12.2B, while gross margin has widened from the high 20s to about 40%. The Juniper networking business, which earns higher margins than servers, is part of that improvement.

The Earnings Trajectory

HPE has beaten analyst expectations for six quarters in a row. In its early-September report, earnings came in 24% above the consensus estimate. Quarterly earnings per share have risen steadily, from $0.38 to $1.02 over that stretch.

Looking forward, analysts expect earnings per share to grow about 20% next fiscal year, to roughly $4.60, and revenue to grow about 17% to around $54B. That forward earnings growth is well above the direct-peer median of 10%. It is the base that makes the low multiple look attractive.

Valuation: Cheap for a Reason, but Perhaps Too Cheap

We have said the discount is partly deserved. The question is whether it is too wide. HPE trades at 14 times forward earnings with a PEG of 0.7. A PEG below 1 is unusual for a company growing revenue in the double digits. For comparison, the broad sector's PEG is 1.1 and the direct-peer median is 1.7.

The average analyst price target is about $67, roughly 9% above the recent price of $62. That is modest, but targets tend to lag fast-moving results. HPE only reported its strong quarter in early September, and analysts often raise targets after a beat rather than before. If next year's earnings land near the top of estimates on the improving margin trend, the same 14-times multiple would imply a higher target. Our analysis suggests room for upside from further earnings revisions. These are analyst estimates, not a forecast we make.

Our systematic screen weighs profitability, growth quality, the direction of earnings revisions and price strength. It applies no hard valuation limit, so a stock is neither favoured nor penalised for its price alone.

How HPE Passed Our Three-Pillar Process

Every holding must clear the same three-pillar process, and re-qualify every month. HPE is not a personal pick or a tip. It is the output of a system that is data-driven, not gut-driven.

Pillar 1 — Stock Universe

The first pillar ranks the entire investable universe on fundamentals, and whatever names post the strongest numbers rise to the top. HPE qualified on the strength of its revenue growth, its rising earnings estimates, its low valuation and its price momentum. You can read how we build the universe in our note on portfolio construction.

Pillar 2 — Optimizer

The Optimizer decides which qualified names to hold, not how big each position should be. Every position is equal-weight. With the Risk Overlay currently holding about 81% of the portfolio in equities across 15 names, each position is roughly 5.4% of the account, not 6.7%. How the Optimizer limits concentration explains this further.

Pillar 3 — Risk Overlay

The third pillar manages market risk. Every night, the system recalculates more than 20 risk indicators across markets and sets our equity exposure for the next day. HPE is a higher-risk holding in this sense. With a Beta of about 1.4, it tends to move more than the market. The overlay does not protect any single stock on its own. It manages the drawdown of the whole portfolio in a broad market decline. In that kind of decline a high-beta name like HPE tends to fall hardest, so the exposure cut the overlay applies to the whole book helps exactly such names most. HPE's own stock-specific risks are handled differently. Equal-weight sizing keeps any one name small, and monthly re-qualification lets a name whose case weakens drop out. Our most recent positioning is in the August 2026 monthly review.

Catalysts on the Radar

• Next earnings. HPE's fiscal fourth-quarter results are due in early December, the first full quarter with Juniper Networks integrated.
• AI server demand. Orders for AI systems built around Nvidia chips remain a major growth driver across the industry.
• Juniper integration. Cost savings and cross-selling from the networking acquisition are expected to build through the next year.
• GreenLake subscriptions. Growth in the pay-as-you-go platform adds recurring, higher-margin revenue.
• Debt reduction. Paying down the acquisition debt would lift the thin net margin over time.

“HPE is the rare holding that is both growing quickly and priced cheaply. The margins are thin and the balance sheet carries debt, but the growth, the rising estimates and the sub-1 PEG are why the data put it in the portfolio.”

Related reading: the August 2026 monthly review for our latest positioning, portfolio construction for how names enter the universe, and why we hold US memory for more on our AI-infrastructure exposure.

Hewlett Packard Enterprise (HPE) is a current Veloris Capital portfolio holding as of the publication date. This deep dive is for educational purposes and is not investment advice. If you choose to copy our strategy on eToro, eToro technically replicates our trades proportionally into your own account, and you stay in control of your account at all times. Past performance is not an indication of future results. Your capital is at risk.

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