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WDC vs. TDC: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
VLVLY vs. RACE: Which Stock Is the Better Value Option?

Investors interested in stocks from the Computer- Storage Devices sector have probably already heard of Western Digital (WDC) and Teradata (TDC). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, Western Digital is sporting a Zacks Rank of #1 (Strong Buy), while Teradata has a Zacks Rank of #3 (Hold). This means that WDC'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 try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

WDC currently has a forward P/E ratio of 6.28, while TDC has a forward P/E of 44.52. We also note that WDC has a PEG ratio of 0.33. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. TDC currently has a PEG ratio of 14.84.

Another notable valuation metric for WDC is its P/B ratio of 2.09. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, TDC has a P/B of 8.10.

These are just a few of the metrics contributing to WDC's Value grade of A and TDC's Value grade of C.

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


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