Tetra Tech (NASDAQ:TTEK) stock performs better than its underlying earnings growth over last five years

When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. Long term Tetra Tech, Inc. (NASDAQ:TTEK) shareholders would be well aware of this, since the stock is up 144% in five years. Also pleasing for shareholders was the 11% gain in the last three months. But this could be related to the strong market, which is up 13% in the last three months.

Since it's been a strong week for Tetra Tech shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for Tetra Tech

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over half a decade, Tetra Tech managed to grow its earnings per share at 11% a year. This EPS growth is slower than the share price growth of 20% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into Tetra Tech's key metrics by checking this interactive graph of Tetra Tech's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Tetra Tech's TSR for the last 5 years was 152%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Tetra Tech provided a TSR of 21% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 20% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Tetra Tech better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Tetra Tech , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com