Should You Investigate Teradata Corporation (NYSE:TDC) At US$47.63?

Teradata Corporation -1.66% Post

Teradata Corporation

TDC

34.39

34.39

-1.66%

0.00% Post

While Teradata Corporation (NYSE:TDC) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. While good news for shareholders, the company has traded much higher in the past year. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today we will analyse the most recent data on Teradata’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Teradata

What Is Teradata Worth?

Teradata is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Teradata’s ratio of 75.13x is above its peer average of 47.96x, which suggests the stock is trading at a higher price compared to the Software industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Teradata’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Teradata look like?

earnings-and-revenue-growth
NYSE:TDC Earnings and Revenue Growth January 30th 2024

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to more than double over the next couple of years, the future seems bright for Teradata. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in TDC’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe TDC should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on TDC for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for TDC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Teradata has 1 warning sign and it would be unwise to ignore it.

If you are no longer interested in Teradata, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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