Teradata trades at $30.59 and has moved in lockstep with the market. Its shares have returned 17.6% over the last six months while the S&P 500 has gained 12.8%.

Is now the time to buy Teradata, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Do We Think Teradata Will Underperform?

We don’t have much confidence in Teradata. Here are three reasons why there are better opportunities than TDC, plus one stock we’d rather own.

1. Weak Billings Point to Soft Demand

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Teradata’s billings came in at $367 million in Q2, and over the last four quarters, its year-on-year growth averaged 3.4%. This performance was underwhelming and suggests that increasing competition is causing challenges in acquiring/retaining customers.

2. Shrinking Operating Margin

While many software businesses point investors to their adjusted profits, which exclude stock-based compensation (SBC), we prefer GAAP operating margin because SBC is a legitimate expense used to attract and retain talent. This is one of the best measures of profitability because it shows how much money a company takes home after developing, marketing, and selling its products.

Analyzing the trend in its profitability, Teradata’s operating margin decreased by 3.5 percentage points over the last two years. Even though its historical margin was healthy, shareholders will want to see Teradata become more profitable in the future. Its operating margin for the trailing 12 months was 7.5%.

3. Cash Flow Margin Set to Decline

Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Over the next year, analysts predict Teradata’s cash conversion will fall. Their consensus estimates imply its free cash flow margin of 43.4% for the last 12 months will decrease to 18.7%.

Final Judgment

We see the value of companies addressing major business pain points, but in the case of Teradata, we’re out. That said, the stock currently trades at 1.8× forward price-to-sales (or $30.59 per share). This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are more exciting stocks to buy at the moment. Let us point you toward one of our all-time favorite software stocks.

Stocks We Would Buy Instead of Teradata

ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.

Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.

Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.