TTEK Stock Study (11-11-25)

Posted by Mark on March 18, 2025 at 07:26 | Last modified: November 11, 2025 10:58

I recently did a stock study on Tetra Tech Inc. (TTEK, $32.07). The previous study is here.

M* writes:

     > Tetra Tech Inc provides consulting and engineering services for
     > environmental, infrastructure, resource management, energy, and
     > international development markets. It specializes in providing
     > water-related services for public and private clients. It designs
     > infrastructure, facilities, and other structures with complex
     > plans and resource management. Tetra Tech has two reportable
     > segments. Its Government Services Group (GSG) segment includes
     > activities with U.S. government clients (federal, state and
     > local) and activities with development agencies world-wide.
     > Commercial/International Services Group (CIG) segment, which
     > derives maximum revenue, includes activities with U.S. commercial
     > clients and international clients other than development agencies.

Since 2016, the medium-size company has grown sales and EPS at annualized rates of 8.1% and 19.0%, respectively [2015 ($0.13/share) excluded to avoid artificial inflation of EPS growth rate]. Lines are mostly up, straight, and parallel except for sales dip in ’20 [FY ends 9/30]. 10-year sales R^2 is 0.88 and Value Line (VL) gives an Earnings Predictability score of 95.

Since 2016, PTPM leads peer and industry averages while trending up from 4.8% to 8.9% (’24) with a last-5-year mean of 8.7%. ROE also leads peer and industry averages while trending up from 9.5% to 19.8% (’24) with a last-5-year mean of 19.3%. Debt-to-Capital is less than peer and industry averages despite increasing from 28.5% to 35.7% (’24) with a last-5-year mean of 33.8%.

Quick Ratio is 1.1 and Interest Coverage is 9.6 per M* who gives a “Narrow” [quantitative] Economic Moat and Financial Health grade of B (per BI website). VL gives a B++ rating for Financial Strength.

With regard to sales growth:

• YF projects YOY 4.4% growth and 8.5% contraction for ’25 and ’26 (based on 7 analysts).
• Zacks projects YOY 4.5% growth and 9.7% contraction for ’25 and ’26 (1 analyst).
• VL projects 3.4% annualized growth from ’24-’29.
• CFRA gives ACE 4.4% YOY growth and 2.3%/year contraction for ’25 and ’24-’26, respectively (6).
• M* gives 2-year ACE of 11.0% contraction per year.

While the rough patch is projected to be short-term, I am forecasting zero long-term growth to be conservative.

With regard to EPS growth:

• MarketWatch projects 15.2% and 10.4% per year for ’24-’26 and ’24-’27 (based on 9 analysts).
• Nasdaq.com projects 3.3% YOY contraction and 4.5%/year growth for ’26 and ’25-’27, respectively (1 analyst).
• Finviz gives ACE 5-year annualized growth of 10.1% (4).
• YF projects YOY 20.3% growth and 2.9% contraction for ’25 and ’26, respectively (7).
• Zacks projects YOY 19.8% growth and 3.3% contraction for ’25 and ’26, respectively (1).
• VL projects 7.4% annualized growth from ’24-’29.
• CFRA gives ACE growth of 23.6% YOY and 9.7% per year for ’25 and ’24-’26 (7).

My 3.0% forecast is less than both long-term estimates (mean: 8.8%). Initial value is ’24 EPS of $1.23/share rather than 2025 Q3 $0.80 (annualized).

My Forecast High P/E is 29.0. Since 2016, high P/E increases from 25.5 to 39.2 (’24) with a last-5-year mean of 36.1 and a last-5-year-mean average P/E of 29.5. I am at lowest level since ’17 (23.5).

My Forecast Low P/E is 18.0. Since 2016, low P/E increases from 16.1 to 23.3 (’24) with a last-5-year mean of 22.9. I am forecasting the lowest level since ’17 (17.0).

My Low Stock Price Forecast (LSPF) of $22.10 is default given initial value from above. That is 31.1% less than the previous close, 19.0% less than the 52-week low, and 10.2% less than the 2023 low.

Since 2016, Payout Ratio (PR) decreases from 23.9% to 17.9% (’24) with a last-5-year mean of 18.5%. I am forecasting below the range at 15.0%.

These inputs land TTEK in the HOLD zone with a U/D ratio of 0.9. Total Annualized Return (TAR) is 5.8%.

PAR (using Forecast Average—not High—P/E) of 1.6% is less than the current risk-free rate (T-bills). If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR but even that is less than I seek in a medium-size company.

To assess MOS, I would compare my inputs with those of Member Sentiment (MS). Four studies (mine excluded) available from the past 90 days are too small a sample for anything but anecdotal comparison. Averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 9.5%, 11.4%, 32.0, 20.2, and 18.6%. I am lower across the board. VL projects an average annual P/E of 28.0, which is greater than MS (26.1) and greater than mine (23.5).

MS high / low EPS are $1.94 / $1.09 versus my $1.43 / $1.23 (per share). My high EPS is less due to a lower growth rate. VL’s $1.80 high EPS is in the middle.

MS LSPF of $25.30 implies a Forecast Low P/E of 23.2 versus the above-stated 20.2. MS LSPF is 14.9% greater than the default $1.09/share * 20.2 = $22.02 resulting in more aggressive zoning. MS LSPF is 14.5% greater than mine.

MOS is robust in this study because my inputs are near or below historical/analyst averages/ranges. MS TAR (13.3%) exceeding mine by 7.5% per year and my lower LSPF are suggestive [anecdotally] of MOS.

With regard to valuation, PEG is 4.3 and 12.5 per M* and my projected P/E, respectively: significantly overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is also rich at 1.36. “Quick and dirty DCF” has stock undervalued by 17%.

Per U/D, TTEK is a BUY just under $27/share. BI TAR criterion would be met [41.5 / ((14.37 / 100 ) +1 ) ^ 5] ~ $21.20 with a forecast high price ~$42.

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