TTEK
Tetra Tech, Inc.
$27.65
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 40.6% above fair value
You pay
$27.65
Bear
$14.42
Fair
$19.66
Bull
$24.91
Bear
$14.42
-47.9%
$0.97 × 14x + net cash
Fair
$19.66
-28.9%
$0.97 × 18x + net cash
Bull
$24.91
-9.9%
$0.97 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($0.97)
Implied Market Multiple
28.5x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $35.00 from 26 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $19.66 per share.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
Wall Street's average price target is $35.00 (from 26 analysts). Our estimate is 58% below the consensus -- consider that gap carefully.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing