Shares of data analytics and database software maker Teradata (TDC 1.74%) fell 19.1% in October 2020, according to data from S&P Global Market Intelligence. When investors took notice of rising coronavirus infection numbers and shifted out of high-flying tech stocks last month, Teradata was pulled down by the broader market trend -- even though the stock really wasn't soaring in the first place.
Teradata simply amplified several rounds of general market panic last month as investors shifted out of risky stocks. For example, the S&P 500 index fell 2.4% on Oct. 26 but Teradata took a 4.7% dive on the same day, despite a complete lack of company-specific news. By the end of the month, Teradata's shares traded 31% lower year to date.
Here's the thing. Teradata was an expensive stock in 2019, ending the year at a nosebleed-inducing price-to-earnings ratio of 220 times trailing earnings. That ratio has now fallen all the way back to 20 times trailing earnings and 13 times forward projections. Memories of last year's sky-high valuation ratios seems to have lingered, setting the share prices up for panic-selling even if there was no real reason to slam the "sell" button. Yes, the company is attempting a turnaround under new management, but it's doing so from a solid financial foundation. Earnings and cash flows have been positive since time immemorial, including during the difficult 2019 fiscal year.
Teradata's stock never looked expensive in October, and now it's a bargain-bin value investment.