Investors with an interest in Computer- Storage Devices stocks have likely encountered both Teradata (TDC) and NetApp (NTAP). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Teradata has a Zacks Rank of #2 (Buy), while NetApp has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TDC has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
TDC currently has a forward P/E ratio of 10.01, while NTAP has a forward P/E of 13.64. We also note that TDC has a PEG ratio of 2.02. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NTAP currently has a PEG ratio of 2.74.
Another notable valuation metric for TDC is its P/B ratio of 10.53. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NTAP has a P/B of 18.51.
These metrics, and several others, help TDC earn a Value grade of B, while NTAP has been given a Value grade of C.
TDC sticks out from NTAP in both our Zacks Rank and Style Scores models, so value investors will likely feel that TDC is the better option right now.
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Teradata Corporation (TDC): Free Stock Analysis Report
NetApp, Inc. (NTAP): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).