Credit: Shutterstock photoValue investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn't want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let's put Teradata CorporationTDC stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock's current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Teradata has a trailing twelve months PE ratio of 14.66, as you can see in the chart below:
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock's price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Teradata has a P/S ratio of about 1.70. This is far lower than the S&P 500 average, which comes in at 3.13 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Teradata currently has a Zacks Value Style Score of 'B', putting it into the top 40% of all stocks we cover from this look. This makes Teradata a solid choice for value investors.
What About the Stock Overall?
Though Teradata might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of 'A' and a Momentum score of 'B'. This gives TDC a Zacks VGM score-or its overarching fundamental grade-of 'A'. (You can read more about the Zacks Style Scores here >> )
Meanwhile, the company's recent earnings estimate revisions have been pretty mixed. Although the current and next year estimates have not seen any revision in the past sixty days, the current year consensus estimate has risen by 2% in the past two months, where as the full year estimate has inched lower by 2.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Teradata Corporation Price and Consensus
Teradata Corporation Price and Consensus | Teradata Corporation Quote
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Teradata is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank further strengthens its growth potential. In fact, over the past one year, the Zacks Computer-Storage Devices industry has clearly outperformed the broader market, as you can see below:
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Teradata Corporation (TDC): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
