Amidst declining fundamentals across the sector, we’ve identified a tech stock that looks particularly risky. A combination of falling core earnings and economic earnings, low ROIC, and an overvalued stock price land Teradata Corporation (TDC) in the Danger Zone.
Reported Results Mislead Investors
From 2015-TTM, TDC’s GAAP net income improved from -$214 million to $14 million. Meanwhile, core earnings, which exclude unusual gains and losses, fell from $233 million to $23 million over the same time, per Figure 1.
Figure 1: TDC’s GAAP Net Income Vs. Core Earnings