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.
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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight 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 means that TDC's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
TDC currently has a forward P/E ratio of 13.79, while NTAP has a forward P/E of 20.16. We also note that TDC has a PEG ratio of 1.80. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. NTAP currently has a PEG ratio of 2.64.
Another notable valuation metric for TDC is its P/B ratio of 6.17. 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 25.65.
These metrics, and several others, help TDC earn a Value grade of B, while NTAP has been given a Value grade of D.
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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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
