TETRA TECH, INC. (TTEK): what the price requires
At today's price, TETRA TECH, INC. (TTEK) is priced for +3.3% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/TTEK
Headline
| Field | Value |
|---|---|
| Ticker | TTEK |
| Company | TETRA TECH, INC. |
| Sector / Industry | Industrials / Consulting |
| Current price | $31.20/sh |
| Composition | U.S. federal government 32% / U.S. state and local government 15% / U.S. commercial 17% / International 37% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 2.1% |
| Operating margin today | 12.1% |
| Margin compression implied | -10.0pp |
| Implied growth | 3.3% |
| Multiple paid | 15x operating income |
The operating-margin requirement is derived from the framework's value band at year 10, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 8.5% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.3pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.41σ |
| cohort percentile (of 225 peers) | 23 |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple; asset-based land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.72x | 5 | expensive |
| Earnings | 1.37x | 5 | expensive |
| Relative | 1.08x | 5 | expensive |
| Growth | 1.25x | 3 | expensive |
Families that justify the price: Relative Families that call it expensive: Asset
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.2%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $24.89 | 1.25x | yes | FCF base $0.7B, growth -6% (input: historical growth), terminal g 0.5%, WACC 8.2%, 5yr projection |
| DCF Exit Multiple | Growth | $34.05 | 0.92x | yes | Exit EV/EBITDA: 11.4x / 13.4x / 15.4x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $28.81 | 1.08x | yes | P/E 18x (static sector reference · 2026-04), scenarios: 15.2x / 18.0x / 20.8x (bear / base = reference held flat / bull), EV/EBITDA 12x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $18.19 | 1.72x | yes | BV/sh $7.11, ROE (TTM) 23.6%, ke 9.3% |
| Two-Stage Excess Return | Asset | $29.08 | 1.07x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $17.13 | 1.82x | yes | Rev $5.1B, growth -6% (input: historical growth; tapered), Terminal P/S: 1.3x / 1.6x / 1.8x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $20.04 | 1.56x | yes | EPS $1.67, growth 2% (input: historical EPS growth), PEG=9.28 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $11.76 | 2.65x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.42B × (1−26%) / WACC 8.2% → EPV (no growth) |
| Residual Income | Asset | $26.59 | 1.17x | yes | BV $7.11 + 5yr PV of (ROE (TTM) 23.6% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $16.35 | 1.91x | yes | √(22.5 × EPS $1.67 × BVPS $7.11) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $27.55 | 1.13x | yes | EBITDA $0.68B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $24.21 | 1.29x | yes | FCF $668.7M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $22.78 | 1.37x | yes | SBC-adj FCF $0.63B (FCF $0.67B − SBC $0.03B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $53.89 | 0.58x | yes | EPS $1.67 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $3.05 | 10.23x | yes | BV $7.11 × (ROIC 3.5% / WACC 8.2%) |
| P/Sales Sector | Relative | $48.97 | 0.64x | yes | Revenue $5.13B × sector P/S 2.5x |
| PEG Fair Value | Relative | $62.63 | 0.50x | yes | EPS $1.67 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $18.05 | 1.73x | yes | EPS $1.67 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $1.2b |
| Net debt / NOPAT (after-tax) | 2.54x |
| Net debt / operating income (pre-tax) | 1.87x |
| Interest coverage | 18.9x |
| Share count CAGR (buyback) | -0.9% |
| Burning cash | no |
Bullet Takeaways
- Tetra Tech is a water-and-environment consultancy spanning U.S. federal, state and local, commercial, and international clients that just absorbed the loss of an entire federal program line, with the FY2025 10-K stating "In fiscal 2025, our U.S. federal government revenue included $576.4 million from USAID programs compared to $677.2 million last fiscal year. We currently expect no significant USAID revenue in fiscal 2026." (accession 0000831641-25-000032), and still raised full-year guidance in April.
- The biggest risk is the client base itself: latest-quarter revenue fell 7.7% year over year on the federal wind-down, and demand across most of the book is set by government budget cycles that can reprice a nine-figure revenue stream inside a single year.
- Third-quarter results arrive July 29, 2026; the items to watch are conversion of the $4.28 billion backlog and whether the margin expansion reported in April holds through the federal transition.
Bull Case
Follow the cash first. Over the trailing twelve months Tetra Tech returned $245 million to shareholders, $68 million in dividends and $177 million in buybacks, with the repurchases alone absorbing about 40% of net income while the dividend claims just 15.5% of earnings. Share count is falling. That mix, buybacks heavy and the dividend deliberately small at a 0.8% yield, is the posture of a management team that reads the current revenue reset as temporary and its own stock as the best use of the cash. The third leg of deployment is deals: the 10-K states "A key part of our growth strategy is to acquire other companies that complement our lines of business or that broaden our technical capabilities and geographic presence" (accession 0000831641-25-000032), and recent acquisitions have pushed the firm deeper into federal technology work, with Amyx providing "application modernization, cybersecurity, systems engineering, financial management and program management support on over 30 U.S. federal government programs" per the same filing.
The operating evidence backs the confidence. The USAID wind-down was the fear hanging over the stock, and the April print was the answer: net revenue grew 8% year over year excluding USAID, State Department, and disaster work, EBITDA margin expanded 90 basis points, and management raised FY2026 guidance to a net revenue range of $4.25 to $4.40 billion and FY2026 adjusted EPS of $1.50 to $1.58. Backlog reached $4.28 billion, up 8% sequentially. A company that lost its largest single federal program is growing the rest of the book anyway, which is the strongest available evidence that the franchise, not the funding line, was the asset.
The franchise itself is the durable part. Tetra Tech describes its edge in the 10-K as "a long track record of successful performance that results in repeat business and limits competition", and the economics agree with the description: return on equity runs 23.6% on moderate leverage, free cash flow of $667 million over the trailing year converts at more than 150% of net income, and all four of the last four quarters generated positive free cash flow. Water infrastructure, environmental remediation, and climate-driven engineering are demand streams that outlast any one administration's spending preferences. The bull case is that a high-return consulting business with recurring public-sector demand is being priced through the fog of a one-time federal client loss.
Bear Case
Start with where this business sits in its demand cycle, because the cycle is set in appropriations committees rather than end markets. A federal policy turn erased a client class in one year: USAID revenue ran $677.2 million in fiscal 2024, $576.4 million in fiscal 2025, and the 10-K now expects none, which is why latest-quarter revenue fell 7.7% year over year. The company's own risk language is blunt: "Our inability to win or renew government contracts during competitive procurement processes could harm our operations and significantly reduce or eliminate our profits" (accession 0000831641-25-000032). The same filing notes that government clients can terminate for convenience, owing only for work completed before the termination. When the majority of a revenue base answers to public budgets, one election or one budget resolution is a demand shock, and the last twelve months proved the mechanism rather than merely describing it.
The price already assumes the shock is over. At roughly 15 times company-wide operating income, today's price needs operating income to grow about 3.4% a year for five years. The rate is modest against what the company has recently delivered; the duration is the bet. Five years of uninterrupted growth assumes no second policy turn across a client base where the first one just happened, and if growth stalls, the support drops to what trailing earnings power defends, which sits roughly 40% below the current price, with the asset-value lens further below that. Only the comparison to sector peer multiples reads the price as close to fair; the methods that do not borrow the sector's own optimism do not get there.
The quarterly tape adds quieter concerns. Operating margin has slipped across the last four quarters, from 12.0% in the June 2025 quarter to 10.8% in the most recent one, gross margin fell alongside it, and total debt is not declining. The acquisition engine that built the company carries its own standing risk, which the filing concedes could keep it "from realizing all of the benefits of the acquisitions, which could weaken our results of operations". A roll-up strategy funded alongside heavy buybacks leaves less slack if the federal transition proves slower or lumpier than the April guidance assumes. The bear case is not that Tetra Tech is a bad business; it is that a government-cycle business one year removed from a demand shock is priced for five smooth years.
Valuation
At $30.97 (July 11, 2026), the market is paying about 15 times company-wide operating income, which embeds operating growth of roughly 3.4% a year for five years. Against what the business has recently delivered, that pace is unremarkable; the stretch is in how long it must persist, not how fast it must run. Notably, the price demands no margin improvement at all: the framework's margin read finds that even an operating margin far below the 12.1% the company earns today would justify the price by year ten, so the entire bet rides on growth lasting, not on the business becoming more profitable per dollar of revenue.
The valuation methods split along a clean line. Peer multiples nearly defend the price: 18.4 times earnings against a consulting-sector median of 18 (n from the sector cohort), and 13.3 times EV/EBITDA against a 12 median, putting the price about 10% above that lens. The earnings-power methods land roughly 40% below the price, asset value sits further down, and the cash-flow projections read the price as more than double what they support. The cash-flow reads deserve their methodology note: they project from a trailing base that carries a negative growth input of about 6% a year, a base with the USAID wind-down inside it, so they extend the reset year forward as if it were the future. The 10-K quantifies exactly what that base absorbed, $576.4 million of fiscal 2025 USAID revenue expected to go to zero (accession 0000831641-25-000032). One basis note keeps the numbers coherent: the $5.13 billion of trailing revenue from SEC filings is gross revenue, which the filing disaggregates by client sector across federal, state and local, commercial, and international work (same accession), while management's raised FY2026 guidance of $4.25 to $4.40 billion is stated on net revenue, the fee-for-service base excluding subcontractor pass-through.
The balance sheet can carry the bet. Leverage is moderate and well covered, debt to equity runs 0.47, every one of the last four quarters produced positive free cash flow, and trailing free cash flow of $667 million converts at more than 150% of net income, an 8.2% yield on the market cap. What the buyer at today's price is choosing between is the peer-multiple read, which says roughly fair, and the trailing-cash-flow read, which says the reset year repeats; the raised guidance and the $4.28 billion backlog are the evidence the market is currently siding with the first.
Catalysts
The April 30 second-quarter print reset the story. Revenue came in at $1.22 billion with adjusted EPS of $0.34 for the quarter, net revenue grew 8% year over year excluding USAID, State Department, and disaster work, and EBITDA margin expanded 90 basis points. Management raised FY2026 guidance to net revenue of $4.25 to $4.40 billion and FY2026 adjusted EPS of $1.50 to $1.58, implying about 9% net revenue growth at the midpoint with roughly 70 basis points of margin expansion. Backlog reached $4.28 billion, up 8% sequentially, the clearest single signal that the ex-USAID book is refilling faster than the federal wind-down drains it.
The forward calendar is concrete. Third-quarter results are scheduled for July 29, 2026, with the call the following morning; backlog conversion and margin durability are the two numbers that will confirm or break the April trajectory. Recent wins keep arriving at the municipal-water end of the franchise: a five-year, $15 million engineering contract from the Los Angeles Department of Water and Power for the Owens Lake dust-control program and a four-year consultancy framework with Scotland Excel. Analyst sentiment leans constructive, with an average Buy rating across eight covering analysts and a mean price target of $40.83; that mean credits the raised forward guidance rather than the trailing reset year, which is why it sits well above where backward-looking cash-flow arithmetic lands.
Peer Cohorts (Per Segment, With Filing Citations)
GSG (reported)
- ACM (AECOM)
- (no filing in the citation store)
- J (JACOBS SOLUTIONS INC.)
- (no filing in the citation store)
- KBR (KBR, Inc.)
- (no filing in the citation store)
- GVA (GRANITE CONSTRUCTION INC)
- (no filing in the citation store)
- STRL (Sterling Infrastructure, Inc.)
- (no filing in the citation store)
- MTZ (MasTec, Inc.)
- (no filing in the citation store)
CIG (reported)
- ACM (AECOM)
- (no filing in the citation store)
- J (JACOBS SOLUTIONS INC.)
- (no filing in the citation store)
- FLR (FLUOR CORPORATION)
- (no filing in the citation store)
- EME (EMCOR Group, Inc.)
- (no filing in the citation store)
- PRIM (Primoris Services Corporation)
- (no filing in the citation store)
- STRL (Sterling Infrastructure, Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Q2 FY2026 earnings release, April 2026 · company announcement, July 2026 · contract announcement, July 2026 · company announcement, 2026 · analyst consensus via StockAnalysis, July 2026