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BUSINESS
Teradata Corporation, together with its subsidiaries, provides a connected multi-cloud data platform for enterprise analytics. The company offers Teradata Vantage, a data platform that allows companies to leverage their data across an enterprise, as well as connects various sources of data to drive ecosystem simplification and support customers on their journey to the cloud through an integrated migration. Its business consulting services include support services for organizations to establish a data and analytic vision, and identify and operationalize analytical opportunities, as well as enable a multi-cloud ecosystem architecture and ensure the analytical infrastructure delivers value. In addition, it offers support and maintenance services.
INVESTMENT RATING
Reflecting future returns on capital that are forecasted to be above the cost of capital, TDC is expected to continue to be a major Value Builder.
Teradata has a current Value Trend Rating of F (Lowest Rating).
This rating combines consistent signals from two proprietary PTR measures of a stock’s attractiveness. Teradata has a slightly negative Appreciation Score of 38 and a poor Power Rating of 27, leading to the Lowest Value Trend Rating.
Teradata’s stock is selling above targeted value. The current stock price of $38.44 compares to targeted value 12 months forward of $33.
This moderately low appreciation potential results in an appreciation score of 38 (62% of the universe has greater appreciation potential.)
Teradata has a Power Rating of 27. (This poor Power Rating indicates that TDC only has a better chance of achieving attractive investment performance over the near to intermediate term than 27% of companies in the universe.)
Factors contributing to this poor Power Rating include: recent price action has been unfavorable; earnings estimate behavior for TDC has been slightly negative recently; and the Computer Programming, Data Processing comparison group is in a slightly weakened position currently.
INVESTMENT PROFILE
Teradata’s financial strength is above average. Financial strength rating is 66.
Relative to the S&P 500 Composite, Teradata Corporation has significant Growth characteristics; its appeal is likely to be to Capital Gain-oriented investors; the perception is that TDC is higher risk. Relative weaknesses include: high financial leverage, and high earnings variability. Teradata’s valuation is high: low dividend yield, moderate P/E ratio, and high price/book ratio. TDC has unusually low market capitalization.
CURRENT SIGNALS
Teradata’s current operations are strong. Return on equity is rising, reflecting: and improving asset utilization.
Teradata’s current technical position is very weak. The stock price is in a 7.2 month down move. The stock has declined 24.9% from its prior high. The stock price is below its 200 day moving average which is in a downtrend.
ALERTS
Teradata Corporation (NYSE: TDC). Important negative changes in investment behavior have recently occurred: negative upside/downside volume developed.
Small positive changes in Teradata Corporation (NYSE: TDC) fundamentals have recently occurred: significant quarterly earnings acceleration occurred.
The stock is currently rated F.
On 4/3/24, Teradata Corporation (NYSE: TDC) stock rose modestly by 0.7%, closing at $38.44. However, this advance was accompanied by unusually low trading volume at 63% of normal. Relative to the market the stock has been weak over the last nine months but has risen 0.5% during the last week.
CASH FLOW
In 2023, Teradata experienced a significant decline in cash of -$83.0 million (-15%). Sources of cash were lower than uses. Cash generated from 2023 EBITDA totaled +$323.0 million. Non-operating uses consumed -$60.0 million (-19% of EBITDA). Cash taxes consumed -$54.0 million (-17% of EBITDA). Re-investment in the business amounted to -$80.0 million (-25% of EBITDA). On a net basis, debt investors received -$27.0 million (-8% of EBITDA) while equity investors removed -$185.0 million (-57% of EBITDA).
Teradata’s Non-operating Income, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by an opposite trend for the Teradata Peer Group. In most years, Teradata was in the third quartile and second quartile. Currently, Teradata is at the lower quartile at -19% of EBITDA (-$60.0 million).
Teradata’s Cash Taxes, %EBITDA enjoyed a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Teradata Peer Group. (Since 2020 Cash Taxes, %EBITDA has experienced a very sharp decline.) In most years, Teradata was in the top quartile and third quartile. Currently, Teradata is at the lower quartile at -17% of EBITDA (-$54.0 million).
Teradata’s Business Re-investment, %EBITDA has suffered a volatile overall downtrend over the period. This downtrend was accompanied by a similar trend for the Teradata Peer Group. In most years, Teradata was in the top quartile and second quartile. Currently, Teradata is slightly above median at -25% of EBITDA (-$80.0 million).
Teradata’s Debt Investors, %EBITDA has experienced a volatile overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Teradata Peer Group. In most years, Teradata was in the top quartile and lower quartile. Currently, Teradata is above median at -8% of EBITDA (-$27.0 million).
Teradata’s Equity Investors, %EBITDA has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by stability for the Teradata Peer Group. In most years, Teradata was in the lower quartile and top quartile. Currently, Teradata is lower quartile at -57% of EBITDA (-$185.0 million).
Teradata’s Change in Cash, %EBITDA has experienced a volatile overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Teradata Peer Group. (Since 2021 Change in Cash, %EBITDA has accelerated very sharply.) In most years, Teradata was in the top quartile and lower quartile. Currently, Teradata is lower quartile at -26% of EBITDA (-$83.0 million).
Teradata’s Cash, %Revenue has experienced a downtrend over the period. This downtrend was accompanied by an opposite trend for the Teradata Peer Group. In most years, Teradata was in the top quartile. Currently, Teradata is slightly above median at +27%.
PROFITABILITY
Teradata’s return on equity has improved very significantly since 2014. The current level of 45.9% is 2.14X the low for the period and is at the high.
Teradata’s very strong positive trend in pretax operating return significantly augmented by a very strong positive trend in non-operating factors is a major performance consideration.
The productivity of Teradata’s assets remained stable over the full period 2014-2023: asset turnover has exhibited little to no overall change.
Teradata’s pretax margin enjoyed a volatile overall uptrend over the period 2014-2023.
Non-operating factors (income taxes and financial leverage) had a very significant positive influence on return on equity.
Teradata’s return on equity is upper quartile (45.9%) for the four quarters ended December, 2023.
Operating performance (pretax return on assets) is slightly below median (6.2%) reflecting asset turnover that is slightly below median (0.98X) and below median pretax margin (6.4%).
Tax “keep” rate (income tax management) is lower quartile (53.0%) resulting in after tax return on assets that is at the lower quartile.
Financial leverage (leverage) is upper quartile (13.87X).
GROWTH RATES
Overall, Teradata’s growth rate has slowed considerably in recent years.
Teradata’s historical income statement and balance sheet growth are not available.
Annual revenue growth has been 0.0% per year.
Total asset growth has been -0.2% per year.
Annual E.P.S. growth has been -3.1% per year.
Equity growth has been -17.0% per year. (More recently it has been -33.1%.)
Teradata’s consensus growth rate forecast (average of Wall Street analysts) is 17.9% — substantially above the average of the historical growth measures.
Relative to the Teradata Peer Group, Teradata’s historical growth measures are consistently lower quartile. Revenue growth (0.0%) has been lower quartile. Total asset growth (-0.2%) has been lower quartile. E.P.S. growth (-3.1%) has been lower quartile. Equity growth (-17.0%) has been lower quartile.
In total contrast, consensus growth forecast (17.9%) is upper quartile.
PRICE HISTORY
Over the full time period, Teradata’s stock price performance has been variable and significantly below market. Between June, 2013 and April, 2024, Teradata’s stock price fell -23%; relative to the market, this was a -76% loss. Significant price moves during the period: 1) October, 2020 – September, 2021: +212%; and 2) February, 2019 – February, 2020: -59%.
TOTAL INVESTMENT RETURNS
Current annual total return performance of -7.7% is lower quartile relative to the S&P 500 Composite.
In addition to being lower quartile relative to S&P 500 Composite, current annual total return performance through February, 2024 of -7.7% is lower quartile relative to Teradata Corporation Peer Group.
Current 5-year total return performance of -4.9% is lower quartile relative to the S&P 500 Composite.
Through February, 2024, with lower quartile current 5-year total return of -4.9% relative to S&P 500 Composite, Teradata’s total return performance is substantially below median relative to Teradata Corporation Peer Group.
VALUATION BENCHMARKS
Relative to S&P 500 Composite, TDC’s overall valuation is high. The highest factor, the price/equity ratio, is upper quartile. Price/earnings ratio is upper quartile. Ratio of enterprise value/assets is above median. Ratio of enterprise value/earnings before interest and taxes is above median. The lowest factor, the ratio of enterprise value/revenue, is near the lower quartile.
Relative to Teradata Peer Group, TDC’s overall valuation is quite high. The highest factor, the price/equity ratio, is upper quartile. Price/earnings ratio is upper quartile. Ratio of enterprise value/assets is at the upper quartile. Ratio of enterprise value/revenue is near the upper quartile. The lowest factor, the ratio of enterprise value/earnings before interest and taxes, is at median.
Teradata has a very large value gap compared to the median. For TDC to achieve median valuation, its current ratio of enterprise value/revenue would have to fall from the current level of 2.39X to 1.84X. If TDC’s ratio of enterprise value/revenue were to fall to 1.84X, its stock price would be lower by $-10 to $28.
For TDC to achieve upper quartile valuation relative to the Teradata Peer Group, its current ratio of enterprise value/revenue would have to rise from the current level of 2.39X to 2.45X. If TDC’s ratio of enterprise value/revenue were to rise to 2.45X, its stock price would increase by $1 from the current level of $38.
VALUE TARGETS
Reflecting future returns on capital that are forecasted to be above the cost of capital, TDC is expected to continue to be a major Value Builder.
Teradata’s current Price Target of $41 represents a +7% change from the current price of $38.44.
This moderately low appreciation potential results in an appreciation score of 38 (62% of the universe has greater appreciation potential.)
Reinforcing this moderately low Appreciation Score of 38, the low Power Rating of 27 contributes to an Value Trend Rating of F.
Teradata’s current Price Target is $41 (+110% from the 2023 Target of $20 and +7% from the 04/03/24 price of $38.44). This dramatic rise in the Target is the result of a +17% increase in the equity base and a +79% increase in the price/equity multiple. One Driver has a positive impact on the price/equity multiple, one has a negative impact, and one has no effect. The forecasted increase in return on equity has a very large positive impact on the price/equity multiple. The forecasted growth has no impact. The forecasted increase in cost of equity has no negative impact.
PTR’s return on equity forecast is 216.% — substantially above our recent forecasts. Forecasted return on equity enjoyed a dramatic, variable increase between 2015 and 2023. The current forecast is significantly above the 2017 low of 26%.
PTR’s growth forecast is 0.0% — in line with our recent forecasts. Forecasted growth erratic between 2015 and 2023. The current forecast is below the 2015 peak of 3%.
PTR’s cost of equity forecast is 13.7% — in line with recent levels. Forecasted cost of equity suffered a dramatic, erratic increase between 2015 and 2023. The current forecast is above the 2017 low of 11.0%.
At Teradata’s current price of $38.44, investors are placing a positive value of $4 on its future investments. This view is consistent with the company’s most recent performance that reflected a growth rate of 0.0% per year, and a return on equity of 120.6% versus a cost of equity of 13.6%.
PTR’s 2025 Price Target of $41 is based on these forecasts and reflects an estimated value of existing assets of $30 and a value of future investments of $11.
Reflecting future returns on capital that are forecasted to be above the cost of capital, TDC is expected to continue to be a major Value Builder.
Teradata has a current Value Trend Rating of F (Lowest Rating).
This rating combines consistent signals from two proprietary PTR measures of a stock’s attractiveness. Teradata has a slightly negative Appreciation Score of 38 and a poor Power Rating of 27, leading to the Lowest Value Trend Rating.
Teradata’s stock is selling above targeted value. The current stock price of $38.44 compares to targeted value 12 months forward of $33.
This moderately low appreciation potential results in an appreciation score of 38 (62% of the universe has greater appreciation potential.)
Teradata has a Power Rating of 27. (This poor Power Rating indicates that TDC only has a better chance of achieving attractive investment performance over the near to intermediate term than 27% of companies in the universe.)
Factors contributing to this poor Power Rating include: recent price action has been unfavorable; earnings estimate behavior for TDC has been slightly negative recently; and the Computer Programming, Data Processing comparison group is in a slightly weakened position currently.
Relative to the S&P 500 Composite, Teradata Corporation has significant Growth characteristics; its appeal is likely to be to Capital Gain-oriented investors; the perception is that TDC is higher risk. Relative weaknesses include: high financial leverage, and high earnings variability. Teradata’s valuation is high: low dividend yield, moderate P/E ratio, and high price/book ratio. TDC has unusually low market capitalization.
Teradata’s Non-operating Income, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by an opposite trend for the Teradata Peer Group. In most years, Teradata was in the third quartile and second quartile. Currently, Teradata is at the lower quartile at -19% of EBITDA (-$60.0 million).
Teradata’s Cash Taxes, %EBITDA enjoyed a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Teradata Peer Group. (Since 2020 Cash Taxes, %EBITDA has experienced a very sharp decline.) In most years, Teradata was in the top quartile and third quartile. Currently, Teradata is at the lower quartile at -17% of EBITDA (-$54.0 million).
Teradata’s Business Re-investment, %EBITDA has suffered a volatile overall downtrend over the period. This downtrend was accompanied by a similar trend for the Teradata Peer Group. In most years, Teradata was in the top quartile and second quartile. Currently, Teradata is slightly above median at -25% of EBITDA (-$80.0 million).
Teradata’s Debt Investors, %EBITDA has experienced a volatile overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Teradata Peer Group. In most years, Teradata was in the top quartile and lower quartile. Currently, Teradata is above median at -8% of EBITDA (-$27.0 million).
Teradata’s Equity Investors, %EBITDA has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by stability for the Teradata Peer Group. In most years, Teradata was in the lower quartile and top quartile. Currently, Teradata is lower quartile at -57% of EBITDA (-$185.0 million).
Teradata’s Change in Cash, %EBITDA has experienced a volatile overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Teradata Peer Group. (Since 2021 Change in Cash, %EBITDA has accelerated very sharply.) In most years, Teradata was in the top quartile and lower quartile. Currently, Teradata is lower quartile at -26% of EBITDA (-$83.0 million).
Teradata’s Cash, %Revenue has experienced a downtrend over the period. This downtrend was accompanied by an opposite trend for the Teradata Peer Group. In most years, Teradata was in the top quartile. Currently, Teradata is slightly above median at +27%.
Teradata’s return on equity is upper quartile (45.9%) for the four quarters ended December, 2023.
Operating performance (pretax return on assets) is slightly below median (6.2%) reflecting asset turnover that is slightly below median (0.98X) and below median pretax margin (6.4%).
Tax “keep” rate (income tax management) is lower quartile (53.0%) resulting in after tax return on assets that is at the lower quartile.
Financial leverage (leverage) is upper quartile (13.87X).
Relative to the Teradata Peer Group, Teradata’s historical growth measures are consistently lower quartile. Revenue growth (0.0%) has been lower quartile. Total asset growth (-0.2%) has been lower quartile. E.P.S. growth (-3.1%) has been lower quartile. Equity growth (-17.0%) has been lower quartile.
In total contrast, consensus growth forecast (17.9%) is upper quartile.
Teradata has a very large value gap compared to the median. For TDC to achieve median valuation, its current ratio of enterprise value/revenue would have to fall from the current level of 2.39X to 1.84X. If TDC’s ratio of enterprise value/revenue were to fall to 1.84X, its stock price would be lower by $-10 to $28.
For TDC to achieve upper quartile valuation relative to the Teradata Peer Group, its current ratio of enterprise value/revenue would have to rise from the current level of 2.39X to 2.45X. If TDC’s ratio of enterprise value/revenue were to rise to 2.45X, its stock price would increase by $1 from the current level of $38.
Teradata’s current Price Target is $41 (+110% from the 2023 Target of $20 and +7% from the 04/03/24 price of $38.44). This dramatic rise in the Target is the result of a +17% increase in the equity base and a +79% increase in the price/equity multiple. One Driver has a positive impact on the price/equity multiple, one has a negative impact, and one has no effect. The forecasted increase in return on equity has a very large positive impact on the price/equity multiple. The forecasted growth has no impact. The forecasted increase in cost of equity has no negative impact.
PTR’s return on equity forecast is 216.% — substantially above our recent forecasts. Forecasted return on equity enjoyed a dramatic, variable increase between 2015 and 2023. The current forecast is significantly above the 2017 low of 26%.
PTR’s growth forecast is 0.0% — in line with our recent forecasts. Forecasted growth erratic between 2015 and 2023. The current forecast is below the 2015 peak of 3%.
PTR’s cost of equity forecast is 13.7% — in line with recent levels. Forecasted cost of equity suffered a dramatic, erratic increase between 2015 and 2023. The current forecast is above the 2017 low of 11.0%.
At Teradata’s current price of $38.44, investors are placing a positive value of $4 on its future investments. This view is consistent with the company’s most recent performance that reflected a growth rate of 0.0% per year, and a return on equity of 120.6% versus a cost of equity of 13.6%.
PTR’s 2025 Price Target of $41 is based on these forecasts and reflects an estimated value of existing assets of $30 and a value of future investments of $11.
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