Tetra Tech (TTEK:NAS) Fundamental Valuation Report

Fundamental Valuation Report

Tetra Tech(TTEK:NAS)

Industrials:Engineering & Construction

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$61.44 (USD) 27/11/2018

Weighted Valuation
$76.50 (USD)

Overall Rating
Undervalued by 24.5%

Valuation Models Analyst Consensus: $76.50 (USD)
(in order of importance)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation

Company Overview (TTEK:NAS USD)

Price 61.44
Range 61.37 – 62.89
52 week 45.40 – 72.33
Open 62.39
Vol / Avg. 214357/295973
Mkt cap 3.4B
P/E 25.39
Div/yield 0.44/0.01
EPS 2.42
Shares 55.36M
Beta 0.98

Company Description

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) reportable segment primarily includes activities with U.S. government clients (federal, state and local) and activities with development agencies worldwide. Commercial/International Services Group (CIG) reportable segment primarily includes activities with U.S. commercial clients and international clients other than development agencies.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for TTEK:NAS

Using a discounted cash flow model we generated an intrinsic value of $77.06 (USD) for TTEK:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

TTEK:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $77.06 1% 5% 1% 5%
WACC (or Ke) 7.68 $98.10 $63.05
Terminal Growth Rate 2.70 $64.31 $96.21
Tax Rate 0.22 $82.43 $71.68
Cash Flow 313,375,265 $72.94 $81.17
Capital Expenditures 10,869,800 $77.19 $76.92
Long Term Debt 364,708,000 $77.38 $76.73

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $37.52 (USD) for TTEK:NAS. We also generated a valuation of $32.70 (USD) using other metrics and comparables.
The comparable companies were AECOM (ACM:NYS), Fluor (FLR:NYS), Jacobs Engineering Group (JEC:NYS), Primoris Services (PRIM:NAS) and Tutor Perini (TPC:NYS).

Company TTEK:NAS End Date Value
Earnings/Share $2.42 (USD)
Book Value/Share $16.91 (USD)
Sales/Share $52.08 (USD)
Cash Flow/Share $2.36 (USD)
EBITDA/Share $4.07 (USD)
Price Based on Comps Adjustment Factor (%)
$57.03 (USD) -11.6
$24.71 (USD) 1.7
$20.13 (USD) 7.1
$89.97 (USD) -55.3
$41.74 (USD) 30.7
TTEK:NAS Ratios Used Average Values ACM:NYS FLR:NYS JEC:NYS PRIM:NAS TPC:NYS
26.31 PE Ratio 23.57 33.49 24.50 33.52 19.60 6.71
3.90 PB Ratio 1.46 1.12 2.03 1.79 1.92 0.45
1.27 PS Ratio 0.39 0.24 0.31 0.74 0.47 0.17
28.04 PCF Ratio 40.28 9.56 149.32 21.52 15.23 5.75
15.89 EV to EBITDA 10.25 10.90 7.70 17.20 8.71 6.73

Multiples

Using a multiples approach we generated a valuation of  $48.31 (USD) for TTEK:NAS

Company TTEK:NAS End Date Value
Earnings/Share $2.42 (USD)
Book Value/Share $16.91 (USD)
Sales/Share $52.08 (USD)
Cash Flow/Share $2.36 (USD)
EBITDA/Share $4.07 (USD)
Price Based on Comps Adjustment Factor
$59.76 (USD) 0
$42.40 (USD) 0
$45.72 (USD) 0
$39.79 (USD) 0
$53.87 (USD) 0
Ratios Ratio Average
PE Ratio 24.69
PB Ratio 2.51
PS Ratio 0.88
PCF Ratio 16.89
EV to EBITDA 13.22

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  TTEK:NAS for the last 10 years was  2.45

We ran the Adjusted Book Value for  TTEK:NAS and generated a book value of  $17.47 (USD)
By multiplying these we get an adjusted valuation of  $42.89 (USD)

Analyst Data

In the Stockcalc database there are 2 analysts that provide a valuation for TTEK:NAS. The 2 analysts have a concensus valuation for TTEK:NAS for 2019 of $76.50 (USD).

TTEK:NAS Tetra Tech

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
2 0 0 5.0000 Buy 2018-11-26

Current Price: 61.44 USD

Analyst Consensus
USD Millions 2019 2020
Mean EPS 2.84 3.06
# EPS Analysts 2 1
Mean Revenue 3,141.10 3,347.30
# Revenue Analysts 2 1
Mean Target Price 76.50
Mean Cash Flow
Mean EBITDA 282.90 291.70
Mean Net Income 159.20 170.40
Mean Debt Outstanding
Mean Tax Rate 26.00
Mean Growth Rate 15.00
Mean Capital Expenditure

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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