• Wondering if Teradata at around US$32.65 is pricing in too much optimism or still offering value? This article walks through what the current numbers might be telling you.
• The stock has returned 2.9% over the past week, 20.5% over the past month, 10.0% year to date and 45.2% over the past year, while longer periods show declines of 27.0% over three years and 29.9% over five years.
• Recent headlines have focused on Teradata's role as a data and analytics platform provider, with attention on how its offerings fit into broader cloud and AI themes. That context helps frame why shorter term returns have looked stronger, while the longer term record still reflects earlier challenges.
• On Simply Wall St's 6 point valuation framework, Teradata currently scores 5 out of 6 checks, as shown in its valuation score. The sections that follow walk through what different valuation approaches suggest about the stock and also hint at a fuller way to think about value at the end of the article.

Approach 1: Teradata Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes the cash a company is expected to generate in the future, then discounts those cash flows back to today to estimate what the entire business might be worth right now.

For Teradata, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flow projections. The latest twelve month free cash flow is about $674.4 million. Analysts provide forecasts for the next few years, and beyond that Simply Wall St extrapolates further out, with ten year projections that include an estimated free cash flow of $252.3 million in 2035. All of these projected cash flows are discounted back into today’s dollars in $.

On this basis, the DCF model suggests an intrinsic value of about $44.22 per share, compared with a current share price around $32.65. That gap implies the stock is trading at roughly a 26.2% discount to this estimate of fair value, based on this model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Teradata is undervalued by 26.2%. Track this in your watchlist or portfolio, or discover 54 more high quality undervalued stocks.

Approach 2: Teradata Price vs Earnings

For profitable companies, the P/E ratio is a common way to think about value because it links what you pay for the stock to the earnings the business is currently generating. A higher P/E often reflects higher growth expectations or a lower perceived risk, while a lower P/E can point to lower expected growth or higher risk.

Teradata trades on a P/E of about 7.30x. That sits well below the Software industry average P/E of around 26.74x and is also below the peer group average of about 26.93x. On the surface, that suggests the stock is priced more conservatively than many industry peers.

Simply Wall St’s Fair Ratio for Teradata is 13.23x. This is a proprietary estimate of what a reasonable P/E might be for the company, given factors such as its earnings growth profile, profit margins, industry, market cap and risk characteristics. Because it blends these company specific factors, the Fair Ratio can give a more tailored view than a simple comparison with broad industry or peer averages.

Comparing Teradata’s current P/E of 7.30x with the Fair Ratio of 13.23x suggests the stock is trading below this Fair Ratio based assessment.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Teradata Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Meet Narratives, a tool on Simply Wall St’s Community page that helps you attach a clear story to Teradata’s numbers by linking your view of its future revenue, earnings and margins to a financial forecast, a Fair Value, and then a simple comparison with the current price.

Instead of just accepting one model output, you can choose or build a Teradata Narrative that reflects your view. For example, you could select a more optimistic narrative that aligns with a Fair Value around the US$49.00 high analyst target, or a more cautious narrative that is closer to the US$21.00 low target. You can then see in real time how fresh news, guidance or earnings update the Fair Value, so you can judge for yourself whether the stock appears expensive or inexpensive relative to your chosen story.

For Teradata, however, we will make it really easy for you with previews of two leading Teradata Narratives:

Fair value in this narrative: US$33.78 per share.

Current price versus this fair value implies the stock is trading about 3.4% below that estimate.

Revenue growth assumption: 0.99% a year.

• Focuses on Teradata as a hybrid, cloud neutral data and analytics platform tied to growing AI workloads and multi cloud adoption.
• Assumes margins improve as recurring revenue grows, costs are streamlined, and share repurchases reduce the share count over time.
• Flags risks around ongoing revenue pressure, competition from hyperscalers and open source tools, and the pace of cloud migration.

Fair value in this narrative: US$21.00 per share.

Current price versus this fair value implies the stock is trading about 55.5% above that estimate.

Revenue growth assumption: revenue declines about 1.98% a year.

• Frames Teradata as under pressure from cloud native platforms, open source tools, and vendor consolidation, with potential share loss and revenue headwinds.
• Builds in shrinking margins, lower earnings by 2028, and only modest share count reduction, despite a higher assumed future P/E multiple.
• Accepts that stronger demand for data and AI, partnerships with hyperscalers, and execution improvements could challenge this more cautious view.

If you want to go beyond these snapshots and see the full reasoning, assumptions, and charts behind each story, you can review the Narratives in detail and decide which one, if either, lines up with your own expectations for Teradata. See what the community is saying about Teradata

Do you think there's more to the story for Teradata? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.