Teradata Corporation (TDC) and MongoDB, Inc. (MDB) are two popular players in the cloud space. TDC is a hybrid cloud analytics software provider known primarily for its analytics platform, Teradata Vantage. MDB provides a general-purpose database platform worldwide. Its offerings include MongoDB Enterprise Advanced and MongoDB Atlas.
Most cloud stocks soared to new highs last year as the COVID-19 pandemic-led remote working trend increased significantly. Investors’ interest in the cloud stocks is evident in the First Trust Cloud Computing ETF’s (SKYY) 37.5% returns over the past year. With ongoing rapid digitalization, and the adoption of technologies such as artificial intelligence (AI) and internet of things (IoT), the cloud computing industry is expected to grow even more in the coming months. According to a Fortune Business Insights report, the global cloud computing market is expected to grow at a 17.9% CAGR between 2021 -2028. As such, TDC and MDB could witness increasing demand for their products and services.
While TDC has gained 131.1% over the past year, MDB has returned 22.4%. Also, in terms of their nine months’ performance, TDC is a clear winner with 109.6% returns versus MDB’s 20.1%. But which of these two stocks is a better pick now? Let's find out.
Click here to check out our Cloud Computing Industry Report for 2021
Latest Movements
On June 2, Deloitte and TDC announced a joint initiative to help their mutual customers migrate their on-premises data management and analytics environments to TDC’s Vantage multi-cloud data platform.
MDB and Alphabet, Inc.’s (GOOGL) Google Cloud announced an expanded five-year partnership in February that will extend their existing go-to-market relationship and provide a deeper integration of Google Cloud products with MDB's global cloud database, MongoDB Atlas.
Recent Financial Results
TDC’s total revenue increased 13.1% year-over-year to $491 million for the quarter ended March 31. Its non-GAAP net income was $78 million, up 160% from the year-ago period. Its non-GAAP EPS came in at $0.69, up 155.6% year-over-year.
For its fiscal fourth quarter, ended January 31, 2021, MDB’s sales came in at $171 million, representing a 38.4% increase from the prior-year quarter. The company’s net loss for the quarter was $75.80 million versus a $62.56 million loss in the year-ago period. Its loss per share came in at $1.25 compared to a $1.10 loss in the prior-year period.
Expected Financial Performance
TDC’s revenue is expected to increase 3.9% in 2021 and 3.3% in 2022. The company’s EPS is expected to increase 10.1% in 2022.
In comparison, analysts expect MDB’s revenue to increase 29.5% in 2022 and 28.8% in 2023. Its EPS is expected to increase 34.3% in 2023.
Profitability
TDC’s $1.89 billion trailing-12-month revenue compares to MDB’s $590.38 million. However, MDB is more profitable with a 70.01% gross profit margin versus TDC’s 59.17%.
TDC’s ROE and ROA of 3.66% and 4.31%, respectively, compare favorably with MDB’s negative values.
Valuation
In terms of trailing-12-month EV/S, MDB is currently trading at 30.43x, 917.7% higher than TDC’s 2.99x. And in terms of trailing-12-month P/S, MDB’s 28.73x is 894.1% higher than TDC’s 2.89x.
So, TDC is the more affordable stock.
POWR Ratings
TDC has an overall A rating, which equates to a Strong Buy in our proprietary POWR Ratings system. However, MDB has an overall F rating, which represents Strong Sell. The POWR Ratings are calculated by considering 118 different factors, with the weighting of each optimized to improve overall performance.
MDB has a D grade for Quality. This is justified by its negative value for trailing-12-month net income margin versus the 4.69% industry average. TDC, on the other hand, has a B grade for Quality. This is in sync with its trailing-12-month net income margin of 0.74%, which is lower than the industry average of 4.69%.
MDB has a D grade for Value also. This is in keeping with its 23.47x forward EV/S, which is 456.2% higher than the 4.22x industry average. TDC has an A grade for Value, which is consistent with its 2.95x forward EV/S, which is 30.1% lower than the 4.22x industry average.
Of the 3 stocks in the A-rated Technology-Storage industry, TDC is ranked #1. Of the 125 stocks in the D-rated Software-Application industry, MDB is ranked #116.
In addition to the POWR Ratings grades we’ve just highlighted, we’ve rated both TDC and MDB for Growth, Stability, Sentiment and Momentum. Click here to see the additional ratings for TDC. Also, get all MDB’s ratings here.
Click here to check out our Software Industry Report for 2021
The Winner
The demand for cloud applications is expected to grow in the coming months with hybrid working structures likely to become the norm. But not every cloud-based company is expected to gain from the industry tailwinds. While TDC’s valuation seems to be justified based on its solid financials, MDB’s sky-high valuation seems unjustified. So, we think it is better to bet on TDC to gain from the industry’s growth in the near- to midterm.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to learn about top-rated stocks in the A-rated Technology-Storage industry. Click here to learn about top-rated stocks in the Software-Application industry.
Click here to check out our Cloud Computing Industry Report for 2021
TDC shares were unchanged in after-hours trading Thursday. Year-to-date, TDC has gained 117.62%, versus a 12.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand.
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