What a time it’s been for Hewlett Packard Enterprise. In the past six months alone, the company’s stock price has increased by a massive 71.4%, reaching $24.48 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is now the time to buy Hewlett Packard Enterprise, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free for active Edge members.

Despite the momentum, we're sitting this one out for now. Here are three reasons we avoid HPE and a stock we'd rather own.

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Hewlett Packard Enterprise’s sales grew at a mediocre 4.2% compounded annual growth rate over the last five years. This fell short of our benchmark for the business services sector.

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Hewlett Packard Enterprise’s unimpressive 5.2% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Hewlett Packard Enterprise historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 2.9%, lower than the typical cost of capital (how much it costs to raise money) for business services companies.

Hewlett Packard Enterprise’s business quality ultimately falls short of our standards. Following the recent surge, the stock trades at 10.6× forward P/E (or $24.48 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are superior stocks to buy right now. Let us point you toward a top digital advertising platform riding the creator economy.

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