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Was Teradata Corporation’s (NYSE:TDC) Earnings Decline Part Of A Broader Industry Downturn?

Frank Brewer

When Teradata Corporation (NYSE:TDC) released its most recent earnings update (31 March 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Teradata has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see TDC has performed. View our latest analysis for Teradata

How Well Did TDC Perform?

I prefer to use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This enables me to examine different stocks on a similar basis, using the most relevant data points. For Teradata, its most recent bottom-line (trailing twelve month) is -US$72.00M, which, in comparison to last year’s figure, has turned from positive to negative. Since these values are fairly short-term, I’ve calculated an annualized five-year value for Teradata’s net income, which stands at US$205.29M.

NYSE:TDC Income Statement May 17th 18

We can further assess Teradata’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Teradata’s revenue growth has been somewhat soft, with an annual growth rate of -1.41%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Looking at growth from a sector-level, the US it industry has been growing its average earnings by double-digit 15.01% over the prior year, and 12.30% over the last five years. This suggests that any uplift the industry is deriving benefit from, Teradata has not been able to reap as much as its average peer.

What does this mean?

While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to forecast what will happen in the future and when. The most valuable step is to examine company-specific issues Teradata may be facing and whether management guidance has regularly been met in the past. You should continue to research Teradata to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for TDC’s future growth? Take a look at our free research report of analyst consensus for TDC’s outlook.
  2. Financial Health: Is TDC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2018. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.