Why Tetra Tech, Inc. (NASDAQ:TTEK) Could Be Worth Watching

Tetra Tech, Inc. (NASDAQ:TTEK), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Tetra Tech’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Tetra Tech

Is Tetra Tech Still Cheap?

According to my valuation model, Tetra Tech seems to be fairly priced at around 19.38% above my intrinsic value, which means if you buy Tetra Tech today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $123.06, there’s only an insignificant downside when the price falls to its real value. In addition to this, Tetra Tech has a low beta, which suggests its share price is less volatile than the wider market.

What does the future of Tetra Tech look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -1.7% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Tetra Tech. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? TTEK seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on TTEK for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on TTEK should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Tetra Tech at this point in time. For example - Tetra Tech has 1 warning sign we think you should be aware of.

If you are no longer interested in Tetra Tech, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.