TETRA TECH, INC. (TTEK): what the price assumes

In the published model solve dated 2026-Q2, anchored at $36.54, TETRA TECH, INC. (TTEK) is priced for +8.1% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-11.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/TTEK

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 10: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.7% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is justified by relative-multiple; asset-based/earnings-power/growth-DCF 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.

Families that justify the price: Relative Families that call it expensive: Asset, Earnings, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.4%); the inversion above states its own rate.

Per-Model Detail (n=15)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

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)
• FY2025 10-K: …Program awards ( 15,060 shares of common stock at target performance) and accrued dividend equivalents David Gan , Chief Legal Officer 8/14/2025 02/09/2026 Sale of (i) 6,000 shares of common stock, (ii) the number of shares of common stock resulting from the vesting of 5,976 restricted stock awards and accrued…
• FY2025 10-K: …strategies that would be implemented, if necessary, to protect against the loss of the deferred tax asset that would otherwise expire. Based upon management's assessment of all available evidence, the Company has concluded that it is more likely than not that the deferred tax assets, net of valuation allowance, will…
• J (JACOBS SOLUTIONS INC.)
• FY2025 10-K: …and balances between Jacobs and JEGI and (ii) equity in the earnings from and investments in all other subsidiaries of the Company that do not guarantee the registered securities of either Jacobs or JEG. This summarized financial information (in thousands) has been prepared and presented pursuant to Regulation S-X…
• FY2025 10-K: …adjusted, as appropriate, to reflect changes in tax rates expected to be in effect when the temporary differences reverse. If and when we determine that a deferred tax asset will not be realized for its full amount, we will recognize and record a valuation allowance with a corresponding charge to earnings. Judgment…
• KBR (KBR, Inc.)
• FY2025 10-K: …us-gaap:SecuredDebtMember 2025-01-04 2026-01-02 0001357615 us-gaap:SecuredOvernightFinancingRateSofrMember kbr:DelayedDrawTermLoanBMember us-gaap:SecuredDebtMember 2025-01-04 2026-01-02 0001357615 us-gaap:BaseRateMember kbr:DelayedDrawTermLoanBMember us-gaap:SecuredDebtMember 2025-01-04 2026-01-02 0001357615…
• FY2025 10-K: 8-04-25 0001357615 kbr:DelayedDrawTermLoanA3Member us-gaap:SecuredDebtMember kbr:ConsolidatedLeverageRatioLessThan125To100Member 2018-04-25 2018-04-25 0001357615 us-gaap:RevolvingCreditFacilityMember us-gaap:LineOfCreditMember kbr:ConsolidatedLeverageRatioLessThan125To100Member 2018-04-25 2018-04-25 0001357615…
• GVA (GRANITE CONSTRUCTION INC)
• FY2025 10-K: …reinvestment of dividends. Fiscal year ending December 31. Item 6. RESERVED 31 Table of Contents Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General We deliver infrastructure solutions for public and private clients primarily in the United States. We are one of the…
• FY2025 10-K: …SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GRANITE CONSTRUCTION INCORPORATED By: /s/ Staci M. Woolsey Staci M. Woolsey Executive Vice…
• STRL (Sterling Infrastructure, Inc.)
• FY2025 10-K: …the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that…
• FY2025 10-K: …units is greater than their carrying value and thus there was no impairment to goodwill. In addition to our annual review, we assess the impairment of goodwill whenever events or changes in circumstances indicate that the carrying value of a reporting unit may be greater than fair value. Factors that could trigger an…
• MTZ (MasTec, Inc.)
• FY2025 10-K: …us-gaap:SalesRevenueNetMember 2024-01-01 2024-12-31 0000015615 mtz:GovernmentTransactionsMember us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember 2025-01-01 2025-12-31 0000015615 mtz:GovernmentTransactionsMember us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember 2023-01-01…
• FY2025 10-K: …mtz:NewTermLoanFacilityThreeYearTrancheMember srt:MinimumMember us-gaap:DomesticLineOfCreditMember 2025-06-26 2025-06-26 0000015615 us-gaap:UnsecuredDebtMember us-gaap:SecuredOvernightFinancingRateSofrMember mtz:NewTermLoanFacilityThreeYearTrancheMember srt:MaximumMember us-gaap:DomesticLineOfCreditMember 2025-06-26…

CIG (reported)

• ACM (AECOM)
• FY2025 10-K: …response exercises with key stakeholders. To manage risks associated with third-party service providers, we typically perform a cybersecurity assessment on new vendors before they are onboarded as a supplier. We conduct periodic reviews of these vendors to evaluate continued compliance with our policies and…
• FY2025 10-K: …tax affects our financial statements beginning fiscal 2025 for those operations that are doing business in countries that have enacted the framework. While the current impact is limited, the continued enactment by all OECD countries or by individual countries could result in additional income tax liability, but the…
• J (JACOBS SOLUTIONS INC.)
• FY2025 10-K: …and reporting from information security professionals, many of whom have decades of experience and hold certifications such as a Certified Information Systems Security Professional (CISSP) or Certified Information Security Manager (CISM). These efforts are supported by advanced technological tools, specialized…
• FY2025 10-K: …mitigate the financial or other impacts of any future pandemics or infectious disease outbreaks on their economies and workforces and our operations therein. The foregoing factors and potential future developments are inherently uncertain, unpredictable and, in many cases, beyond our control. For a description of…
• FLR (FLUOR CORPORATION)
• FY2025 10-K: …and cost of these products, components and raw materials may vary significantly from year to year due to various factors including the logistics market, client demand, prod ucer capacity, inflation, market conditions and specific material shortages. Our pursuit of balanced contractual risk and implementation of…
• FY2025 10-K: …may include significant estimated amounts of CFM. Mission Solutions, primarily acting as a prime contractor or a major subcontractor for a number of government programs, generally performs its services under reimbursable contracts subject to applicable statutes and regulations. In many cases, these contracts include…
• EME (EMCOR Group, Inc.)
• FY2025 10-K: 01-01 2023-12-31 0000105634 eme:ElectricalContractorsAssociationOfTheCityOfChicagoLocalUnion134IBEWJointPensionTrustOfChicagoPensionPlan2Member us-gaap:PensionPlansDefinedBenefitMember 2025-01-01 2025-12-31 0000105634…
• FY2025 10-K: 105634 us-gaap:OperatingSegmentsMember eme:CommercialSiteBasedServicesMember country:US eme:UnitedStatesBuildingServicesMember 2025-01-01 2025-12-31 0000105634 us-gaap:OperatingSegmentsMember eme:CommercialSiteBasedServicesMember country:US eme:UnitedStatesBuildingServicesMember 2024-01-01 2024-12-31 0000105634…
• PRIM (Primoris Services Corporation)
• FY2025 10-K: …2025-01-01 2025-12-31 0001361538 us-gaap:OperatingSegmentsMember prim:MasterServiceAgreementCustomersMember prim:EnergySegmentMember 2025-01-01 2025-12-31 0001361538 us-gaap:OperatingSegmentsMember prim:CostReimbursableContractsMember prim:UAndDSegmentMember 2025-01-01 2025-12-31 0001361538…
• FY2025 10-K: …of January 31, 2024 No No 6/4/2026 ​ ​ 6.2 ​ ​ 7.5 ​ ​ 6.1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Engineer Trust Funds ​ 95-6032478/001 ​ Green as of June 30, 2024 ​ Green as of June 30, 2023 ​ No ​ No ​ 6/30/2028 ​ ​ 5.0 ​ ​ 3.7 ​ ​ 4.9 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Southern California…
• STRL (Sterling Infrastructure, Inc.)
• FY2025 10-K: …in response to market and other factors, including the other factors discussed in "Risks Factors," variations in our quarterly operating results from our expectations or those of securities analysts or investors, downward revisions in securities analysts' estimates, and announcements by us or our competitors of…
• FY2025 10-K: …is an increase over historic investment levels that will fund new transportation infrastructure. The IIJA also includes $25 billion of funding for airport modernization. As a result of the IIJA, we saw an increase in bid activity and project awards which started in the third quarter of 2022 and continued through…

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.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• 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.