Teradata Stock To $26?
Teradata (TDC) stock has jumped 30% during the past day, and is currently trading at $37.88. Our multi-factor assessment suggests that it may be time to sell TDC stock. We have, overall, a pessimistic view of the stock, and a price of $26 may not be out of reach. We believe there are several things to fear in TDC stock given its overall Weak operating performance and financial condition. This isn’t appropriately reflected in the stock’s Moderate valuation which is why we think it is Unattractive.
Below is our assessment:
| CONCLUSION | |
|---|---|
| What you pay: | |
| Valuation | Moderate |
| What you get: | |
| Growth | Very Weak |
| Profitability | Moderate |
| Financial Stability | Very Strong |
| Downturn Resilience | Weak |
| Operating Performance | Weak |
| Stock Opinion | Unattractive |
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Let’s get into details of each of the assessed factors but before that, for quick background: With $3.6 Bil in market cap, Teradata provides a connected multi-cloud data platform enabling enterprise analytics across sectors like financial services, government, healthcare, manufacturing, retail, telecommunications, and transportation.
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[1] Valuation Looks Moderate
| TDC | S&P 500 | |
|---|---|---|
| Price-to-Sales Ratio | 2.1 | 3.4 |
| Price-to-Earnings Ratio | 29.9 | 24.9 |
| Price-to-Free Cash Flow Ratio | 12.5 | 21.7 |
This table highlights how TDC is valued vs broader market. For more details see: TDC Valuation Ratios
[2] Growth Is Very Weak
- Teradata has seen its top line shrink at an average rate of -3.1% over the last 3 years
- Its revenues have fallen -8.2% from $1.8 Bil to $1.7 Bil in the last 12 months
- Also, its quarterly revenues declined -5.5% to $416 Mil in the most recent quarter from $440 Mil a year ago.
| TDC | S&P 500 | |
|---|---|---|
| 3-Year Average | -3.1% | 5.6% |
| Latest Twelve Months* | -8.2% | 6.4% |
| Most Recent Quarter (YoY)* | -5.5% | 7.3% |
This table highlights how TDC is growing vs broader market. For more details see: TDC Revenue Comparison
[3] Profitability Appears Moderate
- TDC last 12 month operating income was $190 Mil representing operating margin of 11.5%
- With cash flow margin of 18.2%, it generated nearly $301 Mil in operating cash flow over this period
- For the same period, TDC generated nearly $118 Mil in net income, suggesting net margin of about 7.1%
| TDC | S&P 500 | |
|---|---|---|
| Current Operating Margin | 11.5% | 18.8% |
| Current OCF Margin | 18.2% | 20.6% |
| Current Net Income Margin | 7.1% | 12.8% |
This table highlights how TDC profitability vs broader market. For more details see: TDC Operating Income Comparison
[4] Financial Stability Looks Very Strong
- TDC Debt was $573 Mil at the end of the most recent quarter, while its current Market Cap is $3.6 Bil. This implies Debt-to-Equity Ratio of 16.2%
- TDC Cash (including cash equivalents) makes up $406 Mil of $1.8 Bil in total Assets. This yields a Cash-to-Assets Ratio of 23.1%
| TDC | S&P 500 | |
|---|---|---|
| Current Debt-to-Equity Ratio | 16.2% | 20.3% |
| Current Cash-to-Assets Ratio | 23.1% | 7.4% |
[5] Downturn Resilience Is Weak
TDC has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
2022 Inflation Shock
- TDC stock fell 50.6% from a high of $58.89 on 25 October 2021 to $29.09 on 11 October 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- The stock is yet to recover to its pre-Crisis high
- The highest the stock has reached since then is $57.41 on 1 August 2023 , and currently trades at $37.88
| TDC | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -50.6% | -25.4% |
| Time to Full Recovery | Not Fully Recovered | 464 days |
2020 Covid Pandemic
- TDC stock fell 33.5% from a high of $27.29 on 15 January 2020 to $18.15 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 26 January 2021
| TDC | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -33.5% | -33.9% |
| Time to Full Recovery | 309 days | 148 days |
2008 Global Financial Crisis
- TDC stock fell 60.6% from a high of $29.08 on 15 October 2007 to $11.46 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 29 October 2009
| TDC | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -60.6% | -56.8% |
| Time to Full Recovery | 343 days | 1,480 days |
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read TDC Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
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