Investors interested in stocks from the Computer- Storage Devices sector have probably already heard of Teradata (TDC) and NetApp (NTAP). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Teradata is sporting a Zacks Rank of #2 (Buy), while NetApp has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that TDC is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
TDC currently has a forward P/E ratio of 12.82, while NTAP has a forward P/E of 13.90. We also note that TDC has a PEG ratio of 1.68. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. NTAP currently has a PEG ratio of 2.79.
Another notable valuation metric for TDC is its P/B ratio of 5.71. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, NTAP has a P/B of 20.44.
Based on these metrics and many more, TDC holds a Value grade of B, while NTAP has a Value grade of C.
TDC is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that TDC is likely the superior value option right now.
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Teradata Corporation (TDC): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).