Teradata Corp (TDC, Financial) recently experienced a daily loss of 6.24%, contributing to a 3-month decline of 2.16%. Despite these fluctuations, the company maintains an Earnings Per Share (EPS) of $0.61. Investors and analysts alike are keen to understand: is Teradata fairly valued in the current market? This article delves into a valuation analysis to answer this pivotal question and invites readers to explore the comprehensive analysis that follows.
Company Overview
Teradata Corp (TDC, Financial) is a leading provider of analytic data products and services. The company operates primarily in data and analytics, offering solutions that encompass data warehousing, asset optimization, fraud prevention, product innovation, and risk mitigation. Teradata's majority revenue is sourced from the United States, reflecting its strong domestic presence. With a current stock price of $43.4 and a GF Value of $44.13, the company's valuation warrants a closer look to determine whether its shares are trading at a fair price.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, incorporating historical trading multiples, an adjustment factor based on past performance and growth, and future business performance projections. When a stock's price aligns closely with the GF Value Line, it is considered fairly valued. Conversely, a significant deviation above this line suggests overvaluation and potentially poor future returns, while a price well below indicates undervaluation and the prospect of higher returns.
Teradata (TDC, Financial), with its market cap of $4.20 billion, appears to be fairly valued according to GuruFocus' proprietary valuation method. This fair valuation implies that the long-term return of Teradata's stock may closely track the company's business growth rate.
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Financial Strength Assessment
Investors must scrutinize a company's financial strength to avoid potential capital loss. Teradata's cash-to-debt ratio of 0.54 ranks below that of many peers within the Software industry. This positions Teradata's financial strength at a fair level, with a GuruFocus ranking of 5 out of 10.
Profitability and Growth Prospects
Teradata has been profitable for 7 out of the past 10 years, with a 12-month revenue of $1.80 billion and an Earnings Per Share (EPS) of $0.61. Its operating margin of 8.21% is competitive within the Software industry. The company's profitability is ranked 6 out of 10, indicating a stable financial footing.
Growth is a critical valuation factor, and Teradata's 3-year average revenue growth rate is below the industry median, while its EBITDA growth rate of 14.2% is more promising, surpassing over half of its industry competitors.
ROIC vs. WACC Analysis
Comparing Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) provides insight into profitability. Ideally, ROIC should exceed WACC to indicate efficient cash flow generation. Teradata's ROIC of 5.67 is currently below its WACC of 8.39, suggesting room for improvement in capital efficiency.
Final Thoughts on Teradata's Valuation
Overall, Teradata (TDC, Financial) is fairly valued in the market. The company's financial situation is stable, and its profitability is reasonable. Its growth is commendable, outperforming 58.37% of its peers in the Software industry. For a deeper understanding of Teradata's financial health, investors can review its 30-Year Financials here.
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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.
