TDC vs. NTAP: Which Stock Is the Better Value Option?

Investors looking for stocks in the Computer- Storage Devices sector might want to consider either Teradata (TDC) or NetApp (NTAP). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Teradata and NetApp are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. 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. But this is just one piece of the puzzle for value investors.

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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

TDC currently has a forward P/E ratio of 9.97, while NTAP has a forward P/E of 12.36. We also note that TDC has a PEG ratio of 2.01. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. NTAP currently has a PEG ratio of 2.48.

Another notable valuation metric for TDC is its P/B ratio of 10.43. 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 16.77.

These are just a few of the metrics contributing to TDC's Value grade of B and NTAP's 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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This article originally published on Zacks Investment Research (zacks.com).

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