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

Zacks Equity Research
Is (CRM) Outperforming Other Computer and Technology Stocks This Year?

Investors looking for stocks in the Computer- Storage Devices sector might want to consider either Super Micro Computer (SMCI) or Teradata (TDC). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Super Micro Computer has a Zacks Rank of #2 (Buy), while Teradata has a Zacks Rank of #3 (Hold) right now. This means that SMCI's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

SMCI currently has a forward P/E ratio of 13.64, while TDC has a forward P/E of 31.09. We also note that SMCI has a PEG ratio of 1.05. 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. TDC currently has a PEG ratio of 10.36.

Another notable valuation metric for SMCI is its P/B ratio of 1.55. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, TDC has a P/B of 8.29.

These metrics, and several others, help SMCI earn a Value grade of A, while TDC has been given a Value grade of C.

SMCI has seen stronger estimate revision activity and sports more attractive valuation metrics than TDC, so it seems like value investors will conclude that SMCI is the superior option right now.


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