Teradata Corp (TDC, Financial) recently experienced a significant daily loss of 13.8%, contributing to a three-month decline of 32.05%. Despite these setbacks, the company's Earnings Per Share (EPS) stands at 0.42. This financial snapshot raises a critical question: Is Teradata modestly undervalued? This article delves deep into Teradata's valuation to provide investors with insights into its current market position and potential future performance.
Company Overview
Teradata Corp provides a broad range of analytic data products and services. The company specializes in data and analytics solutions that manage and analyze extensive data sets to deliver meaningful insights. Teradata also offers marketing applications to help businesses enhance customer loyalty through data-driven strategies. The company's solutions support various business needs including data warehousing, asset optimization, fraud prevention, and risk mitigation. Predominantly, Teradata generates its revenue from the United States, marking a significant presence in the data and analytics industry.
Understanding the GF Value
The GF Value is a proprietary measure used to determine the intrinsic value of a stock. It is calculated considering historical trading multiples like PE, PS, PB ratios, and Price-to-Free-Cash-Flow, along with a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. This value serves as a benchmark for determining whether a stock is overvalued, fairly valued, or undervalued compared to its current market price.
For Teradata, the GF Value suggests that the stock is modestly undervalued. This assessment aligns with the current market price of $32.72 per share against a GF Value of $45.56, indicating potential for future price appreciation.
Financial Strength and Stability
Investing in companies with robust financial health reduces the risk of significant capital loss. Teradata's cash-to-debt ratio of 0.76 positions it below 68.85% of its industry peers, suggesting some financial vulnerabilities. However, the company's financial strength has been rated as fair by GuruFocus, with a score of 5 out of 10.
Profitability and Growth Prospects
Teradata has maintained profitability over the past decade, with an operating margin of 10.15% that ranks better than 72.07% of its competitors. This profitability, coupled with a 3-year average EBITDA growth rate of 17.9%, suggests that Teradata is not only managing its current operations effectively but also growing at a healthy pace.
Investment Considerations
When assessing investment viability, comparing the Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) is crucial. Teradata's ROIC of 5.7 is currently below its WACC of 6.94, indicating that the company may not be generating adequate returns on its investments.
Conclusion
Overall, Teradata (TDC, Financial) appears to be modestly undervalued, presenting a potentially attractive opportunity for value investors. The company's solid profitability and fair financial strength, combined with its growth prospects, make it a candidate for those looking to invest in the technology sector. For more detailed financial analysis and to explore Teradata's historical financials, visit GuruFocus Financials.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
