Is There Now An Opportunity In Teradata Corporation (NYSE:TDC)?

While Teradata Corporation (NYSE:TDC) might not have the largest market cap around , it saw significant share price movement during recent months on the NYSE, rising to highs of US$39.37 and falling to the lows of US$31.67. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Teradata's current trading price of US$32.78 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Teradata’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Teradata

What's The Opportunity In Teradata?

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 76.24x is above its peer average of 40.12x, which suggests the stock is trading at a higher price compared to the Software industry. Furthermore, Teradata’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will Teradata generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Teradata's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

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.

If you'd like to know more about Teradata as a business, it's important to be aware of any risks it's facing. For example - Teradata has 2 warning signs we think you should be aware of.

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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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.