Is It Time To Revisit Teradata (TDC) After Its Recent Share Price Pullback

• If you are wondering whether Teradata's current share price offers good value or not, you are in the right place because this article focuses squarely on what the numbers say about the stock.
• Teradata shares last closed at US$26.58, with a 7 day return of a 5.1% decline, a 30 day return of a 29.8% decline, and a 1 year return of a 17.1% gain, which gives you a sense of both recent setbacks and longer term recovery.
• Recent attention on Teradata has been shaped by ongoing interest in data and analytics platforms and how companies like Teradata position themselves within that space. This context has helped frame how investors think about the stock's risk and opportunity, even when short term price moves are mixed.
• On our valuation checks, Teradata scores 5 out of 6 for being potentially undervalued, giving it a value score of 5. Next we will unpack how different valuation methods assess the stock and then finish with a perspective on an even richer way to think about fair value.

Teradata delivered 17.1% returns over the last year. See how this stacks up to the rest of the Software industry.

Approach 1: Teradata Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company could be worth today by projecting its future cash flows and discounting them back to the present using a required return.

For Teradata, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flows in US$. The latest twelve month free cash flow is about $284.1 million. Analysts and extrapolated estimates feed into a ten year path that includes projected free cash flow of $318.78 million in 2026 and $463.58 million in 2035, with $356 million indicated for 2028. Simply Wall St only uses analyst inputs where available and then extends the series for later years.

Bringing all those projected cash flows back to today produces an estimated intrinsic value of US$64.59 per share. Compared with the recent share price of US$26.58, the model indicates an implied discount of about 58.8%. On this cash flow view alone, the shares appear materially undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Teradata is undervalued by 58.8%. Track this in your watchlist or portfolio, or discover 48 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Teradata.

Approach 2: Teradata Price vs Earnings (P/E)

For a profitable business like Teradata, the P/E ratio is a useful shorthand because it links what you pay directly to the earnings the company is already generating. It lets you see how many dollars the market is currently willing to pay for each dollar of earnings.

What counts as a “normal” P/E depends on how the market views a company’s growth prospects and risk profile. Higher expected growth or lower perceived risk can justify a higher multiple, while lower growth or higher risk tends to pull that multiple down.

Teradata currently trades on a P/E of 18.85x. That sits below the Software industry average of about 27.80x and also below the peer group average of 28.98x. Simply Wall St’s Fair Ratio model, which estimates what a more tailored P/E might be after considering factors like earnings growth, industry, profit margins, market cap and company specific risks, arrives at a Fair Ratio of 25.73x.

This Fair Ratio can be more informative than simple peer or industry comparisons because it adjusts for Teradata’s own characteristics rather than treating all Software companies as identical. Comparing the Fair Ratio of 25.73x with the current P/E of 18.85x suggests the shares trade below that tailored reference point.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Teradata Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St you can use Narratives on the Community page, where you and other investors link a clear story about Teradata to specific revenue, earnings and margin forecasts. You can then translate those into a fair value and compare that fair value with the current price to decide whether the stock looks attractive or not. The system updates your Narrative automatically when fresh news or earnings arrive. For example, one Teradata Narrative might lean toward the higher fair value of about US$49.00, while another anchors closer to the lower fair value of about US$21.00, giving you a simple view of how different outlooks on the same company can lead to very different conclusions.

For Teradata, however, we will make it really easy for you with previews of two leading Teradata Narratives:

These are not predictions. They are worked examples of what different analyst-style assumptions would need to look like in order to justify very different fair values. Use them as reference points for your own view rather than answers in themselves.

🐂 Teradata Bull Case

Fair value in this bullish narrative: US$49.00 per share

Implied discount to that fair value versus the last close of US$26.58: about 45.8% undervalued

Revenue growth assumption used in this narrative: about 123%

• Assumes Teradata's earnings power improves over time as hybrid and agent-focused AI capabilities gain traction with large enterprises.
• Uses analyst forecasts that point to revenue of about US$1.6b and earnings of US$112.5m by 2028, with a future P/E of 30.0x applied to those earnings and discounted back at 8.7%.
• Accepts meaningful business risks around cloud transition, competition from hyperscalers and open source tools, and customer churn, but still treats the higher analyst price target of US$28.00 as justified on these assumptions.

🐻 Teradata Bear Case

Fair value in this bearish narrative: US$21.00 per share

Implied premium to that fair value versus the last close of US$26.58: about 26.7% overvalued

Revenue growth assumption used in this narrative: about 198%

• Frames Teradata as facing structural pressure as more workloads move to integrated cloud platforms and open source tools, with pricing pressure and a legacy perception weighing on margins and retention.
• Uses analyst assumptions that revenue trends down by 2.0% a year, margins compress to 5.4% and earnings reach US$87.3m by 2028, then applies a 29.0x P/E and an 8.6% discount rate to arrive at the US$21.00 fair value.
• Acknowledges that partnerships with hyperscalers, AI offerings and execution improvements could support better outcomes, which is why this is framed as a scenario you would need to believe in to side with the lowest analyst target.

Taken together, these Narratives show how the same company can support very different fair values depending on what you think about revenue, margins and future P/E. If you want to see how the full set of assumptions, risks and alternative paths fit together for Teradata, Curious how numbers become stories that shape markets? Explore Community Narratives and weigh these bullish and bearish setups against your own expectations before making any decision.

Do you think there's more to the story for Teradata? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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