Investment Thesis
Teradata's core business is deteriorating with declining revenue (-5% YoY) and negative operating income (-8.1% margin), indicating fundamental operational challenges masked by substantial non-operating gains. While strong free cash flow of $391M and a $816M cash position provide near-term stability, the inability to cover interest expense from operations (-4.5x coverage ratio) and shrinking revenue base create unsustainable long-term dynamics that warrant defensiveness.
Strengths
- Exceptional free cash flow generation of $391M (88.1% FCF margin) demonstrates cash conversion efficiency
- Strong liquidity position with $816M in cash providing substantial financial buffer
- Healthy gross margin of 62.2% indicates underlying software business model retains pricing power
- Manageable debt-to-equity ratio of 0.76x relative to total asset base of $2.1B
Risks
- Negative operating margin (-8.1%) with declining revenue (-5% YoY) indicates core business deterioration and revenue quality concerns
- Negative interest coverage ratio (-4.5x) means operations cannot service debt obligations; company dependent on non-operating income and cash reserves
- Massive $371M gap between operating income (-$36M) and net income ($335M) suggests non-operating gains are unsustainable and masking operational distress
- Revenue contraction in a software business signals loss of market competitiveness or customer attrition
Key Metrics to Watch
- Operating margin trend - any further deterioration confirms structural business problems
- Revenue growth trajectory - need reversal from -5% decline to -0% or positive to restore confidence
- Operating cash flow sustainability - critical early warning indicator if starts declining despite reported net income
- Interest coverage ratio - if becomes more negative, refinancing risk increases as cash depletes
Financial Metrics
Revenue
444.0M
Net Income
335.0M
EPS (Diluted)
$3.47
Free Cash Flow
391.0M
Total Assets
2.1B
Cash
816.0M
Profitability Ratios
Gross Margin
62.2%
Operating Margin
-8.1%
Net Margin
75.5%
ROE
60.1%
ROA
15.6%
FCF Margin
88.1%
Balance Sheet & Liquidity
Current Ratio
1.30x
Quick Ratio
1.29x
Debt/Equity
0.76x
Debt/Assets
74.0%
Interest Coverage
-4.50x
Long-term Debt
424.0M
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-07T10:46:24.430141 |
Data as of: 2026-03-31 |
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