Hybrid cloud analytics software provider Teradata Corporation’s (TDC) solutions and services comprise of software, hardware, and related business consulting and support services. It primarily offers Teradata Vantage, an analytics platform. On the other hand, Snowflake Inc. (SNOW) provides a cloud-based data platform. The company's platform provides a Data Cloud, enabling customers to consolidate data into a single source of truth to drive meaningful business insights and share data.
A data warehouse is a database that takes data from multiple sources and stores them in a relational database. Even though these services are vulnerable to cyber-attacks, the rising demand for next-generation business intelligence and the growing need for dedicated storage systems are driving the growth of the data warehouse industry. Furthermore, the future looks promising for the data warehouse industry due to the escalating use of mining for data analytics and the increasing proliferation of cloud technology among enterprises. According to a Research Nester report, the global data warehousing market is expected to grow at a CAGR of 10% from 2022 to 2031. As a result, both TDC and SNOW should benefit.
TDC has gained 6.3% year-to-date, while SNOW has negative returns. Also, TDC’s 13.2% gains over the past year compared to SNOW’s negative returns. Moreover, TDC is the clear winner with 14.6% gains over the past three months versus SNOW’s negative returns.
But which of these two stocks is a better buy now? Let’s find out.
Latest Developments
On February 09, 2022, TDC announced that it had entered into an accelerated share repurchase agreement with JPMorgan Chase Bank, N.A., to repurchase $250 million of the company’s common stock. It intends to fund the ASR from cash on hand.
On March 02, 2022, SNOW signed a definitive agreement to acquire Streamlit. With this strategic acquisition, the two companies will join forces to unlock the unrealized potential of data and make it easier to build beautiful applications.
Recent Financial Results
TDC’s revenue declined 3% year-over-year to $475 million for the fourth quarter ended December 31, 2021. However, its non-GAAP operating income grew 34% year-over-year to $90 million, while its non-GAAP net income increased 52% year-over-year to $64 million. Its non-GAAP EPS came in at $0.57, up 50% year-over-year.
SNOW’s revenue gained 101.5% year-over-year to $383.77 million for the fiscal fourth quarter ended January 31, 2021. Its operating loss declined 24.1% year-over-year to $152.03 million, while its net loss decreased 33.6% year-over-year to $132.15 million. The company’s loss per share came in at $0.43, down 38.6% year-over-year.
Expected Financial Performance
Analysts expect TDC’s revenue to increase 1% in the current year and 4.8% next year. The company’s EPS is expected to decline 21.4% in the current year but grow 19.9% next year. Moreover, its EPS is expected to grow at a rate of 12.8% per annum over the next five years.
On the other hand, SNOW’s revenue is expected to increase 66.2% in the current year and 55.1% next year. Also, its EPS is expected to grow 1,500% in the current year and 137.5% next year. SNOW’s EPS is expected to grow at a rate of 295.9% per annum over the next five years.
Profitability
TDC’s trailing-12-month revenue is 1.57 times what SNOW generates. TDC is also more profitable, with an EBITDA margin and net income margin of 19.98% and 7.67%, respectively, compared to SNOW’s negative returns.
Furthermore, TDC’s ROE, ROA, and ROTC of 34.19%, 6.88%, and 14.19% compare favorably with SNOW’s negative returns.
Valuation
In terms of forward non-GAAP P/E, SNOW is currently trading at 1,082.18x, significantly higher than TDC’s 23.69x. Moreover, SNOW’s forward EV/EBITDA ratio of 762.87x is substantially higher than TDC’s 10.23x.
So, TDC is relatively affordable here.
POWR Ratings
TDC has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, SNOW has an overall rating of D, which translates to a Sell. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
TDC has an A grade for Value, consistent with its 11.63x forward P/CF, 37.7% lower than the 18.66x industry average. However, SNOW has a D grade for Value, in sync with its 192.63x forward P/CF, 932.1% higher than the 18.66x industry average.
Moreover, TDC has a grade of A for Quality. This is justified given TDC's 0.88% trailing-12-month asset turnover ratio, 39.7% higher than the industry average of 0.63%. On the other hand, SNOW has a Quality grade of D, in sync with its 0.19% trailing-12-month asset turnover ratio, 69.2% lower than the industry average of 0.63%.
Of the 81 stocks in the Technology - Services industry, TDC is ranked #12. However, SNOW is ranked #65.
Beyond what I’ve stated above, we have also rated the stocks for Growth, Stability, Momentum, and Sentiment. Click here to view all the TDC ratings. Also, get all the SNOW ratings here.
The Winner
The data warehouse industry is expected to perform well due to continued digital transformation. While both TDC and SNOW are expected to gain, it is better to bet on TDC now because of its relatively lower valuation, higher profitability, and better financials.
Our research shows that the odds of success increase when one invests in stocks with an Overall POWR Rating of Strong Buy or Buy. View all the top-rated stocks in the Technology - Services industry here.
SNOW shares . Year-to-date, SNOW has declined -48.69%, versus a -10.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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