Intrinsic value of Tetra Tech, Inc. - TTEK

Previous Close

$57.83

  Intrinsic Value

$45.16

stock screener

  Rating & Target

sell

-22%

Previous close

$57.83

 
Intrinsic value

$45.16

 
Up/down potential

-22%

 
Rating

sell

We calculate the intrinsic value of TTEK stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 3.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  3,023
  3,093
  3,172
  3,262
  3,360
  3,469
  3,587
  3,715
  3,853
  4,001
  4,159
  4,328
  4,507
  4,698
  4,901
  5,116
  5,343
  5,583
  5,837
  6,106
  6,389
  6,687
  7,002
  7,333
  7,682
  8,050
  8,437
  8,844
  9,272
  9,723
Variable operating expenses, $m
  2,768
  2,829
  2,900
  2,979
  3,067
  3,164
  3,269
  3,382
  3,505
  3,636
  3,695
  3,845
  4,005
  4,174
  4,354
  4,545
  4,747
  4,961
  5,187
  5,425
  5,676
  5,942
  6,221
  6,516
  6,826
  7,152
  7,496
  7,858
  8,238
  8,639
Fixed operating expenses, $m
  58
  60
  61
  62
  64
  65
  66
  68
  69
  71
  72
  74
  76
  77
  79
  81
  83
  84
  86
  88
  90
  92
  94
  96
  98
  100
  103
  105
  107
  109
Total operating expenses, $m
  2,826
  2,889
  2,961
  3,041
  3,131
  3,229
  3,335
  3,450
  3,574
  3,707
  3,767
  3,919
  4,081
  4,251
  4,433
  4,626
  4,830
  5,045
  5,273
  5,513
  5,766
  6,034
  6,315
  6,612
  6,924
  7,252
  7,599
  7,963
  8,345
  8,748
Operating income, $m
  197
  204
  211
  220
  230
  240
  252
  265
  279
  294
  391
  408
  427
  447
  467
  490
  513
  538
  565
  593
  622
  654
  687
  722
  758
  797
  838
  881
  927
  975
EBITDA, $m
  300
  307
  315
  324
  334
  346
  358
  372
  387
  403
  420
  438
  458
  479
  501
  525
  550
  577
  605
  635
  666
  700
  735
  772
  811
  853
  896
  942
  990
  1,041
Interest expense (income), $m
  12
  15
  16
  18
  19
  21
  23
  25
  27
  29
  32
  34
  37
  40
  44
  47
  51
  55
  59
  64
  68
  73
  78
  84
  90
  96
  102
  109
  116
  124
  132
Earnings before tax, $m
  182
  187
  194
  201
  209
  218
  227
  238
  250
  262
  357
  371
  386
  403
  420
  439
  458
  479
  501
  524
  549
  575
  603
  632
  663
  695
  729
  765
  803
  843
Tax expense, $m
  49
  51
  52
  54
  56
  59
  61
  64
  67
  71
  96
  100
  104
  109
  113
  118
  124
  129
  135
  142
  148
  155
  163
  171
  179
  188
  197
  207
  217
  228
Net income, $m
  133
  137
  141
  147
  152
  159
  166
  174
  182
  191
  261
  271
  282
  294
  307
  320
  335
  350
  366
  383
  401
  420
  440
  461
  484
  507
  532
  559
  586
  615

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,998
  2,044
  2,097
  2,156
  2,221
  2,293
  2,371
  2,455
  2,546
  2,644
  2,749
  2,860
  2,979
  3,105
  3,239
  3,381
  3,531
  3,690
  3,858
  4,035
  4,223
  4,420
  4,628
  4,847
  5,078
  5,320
  5,576
  5,845
  6,128
  6,426
Adjusted assets (=assets-cash), $m
  1,998
  2,044
  2,097
  2,156
  2,221
  2,293
  2,371
  2,455
  2,546
  2,644
  2,749
  2,860
  2,979
  3,105
  3,239
  3,381
  3,531
  3,690
  3,858
  4,035
  4,223
  4,420
  4,628
  4,847
  5,078
  5,320
  5,576
  5,845
  6,128
  6,426
Revenue / Adjusted assets
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
  1.513
Average production assets, $m
  453
  464
  476
  489
  504
  520
  538
  557
  578
  600
  624
  649
  676
  705
  735
  767
  801
  838
  876
  916
  958
  1,003
  1,050
  1,100
  1,152
  1,207
  1,266
  1,327
  1,391
  1,458
Working capital, $m
  305
  312
  320
  329
  339
  350
  362
  375
  389
  404
  420
  437
  455
  475
  495
  517
  540
  564
  590
  617
  645
  675
  707
  741
  776
  813
  852
  893
  936
  982
Total debt, $m
  298
  321
  348
  378
  411
  447
  487
  530
  576
  625
  678
  735
  795
  859
  927
  999
  1,075
  1,156
  1,241
  1,331
  1,426
  1,526
  1,631
  1,742
  1,859
  1,982
  2,112
  2,248
  2,392
  2,543
Total liabilities, $m
  1,013
  1,036
  1,063
  1,093
  1,126
  1,162
  1,202
  1,245
  1,291
  1,341
  1,394
  1,450
  1,510
  1,574
  1,642
  1,714
  1,790
  1,871
  1,956
  2,046
  2,141
  2,241
  2,346
  2,457
  2,574
  2,697
  2,827
  2,964
  3,107
  3,258
Total equity, $m
  985
  1,008
  1,034
  1,063
  1,095
  1,130
  1,169
  1,210
  1,255
  1,304
  1,355
  1,410
  1,469
  1,531
  1,597
  1,667
  1,741
  1,819
  1,902
  1,989
  2,082
  2,179
  2,281
  2,389
  2,503
  2,623
  2,749
  2,882
  3,021
  3,168
Total liabilities and equity, $m
  1,998
  2,044
  2,097
  2,156
  2,221
  2,292
  2,371
  2,455
  2,546
  2,645
  2,749
  2,860
  2,979
  3,105
  3,239
  3,381
  3,531
  3,690
  3,858
  4,035
  4,223
  4,420
  4,627
  4,846
  5,077
  5,320
  5,576
  5,846
  6,128
  6,426
Debt-to-equity ratio
  0.300
  0.320
  0.340
  0.360
  0.380
  0.400
  0.420
  0.440
  0.460
  0.480
  0.500
  0.520
  0.540
  0.560
  0.580
  0.600
  0.620
  0.640
  0.650
  0.670
  0.680
  0.700
  0.710
  0.730
  0.740
  0.760
  0.770
  0.780
  0.790
  0.800
Adjusted equity ratio
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493
  0.493

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  133
  137
  141
  147
  152
  159
  166
  174
  182
  191
  261
  271
  282
  294
  307
  320
  335
  350
  366
  383
  401
  420
  440
  461
  484
  507
  532
  559
  586
  615
Depreciation, amort., depletion, $m
  102
  103
  103
  104
  105
  105
  106
  107
  108
  109
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
Funds from operations, $m
  235
  240
  245
  251
  257
  264
  272
  281
  290
  300
  289
  301
  313
  326
  340
  355
  371
  388
  406
  425
  445
  466
  488
  512
  537
  563
  590
  619
  650
  682
Change in working capital, $m
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  46
Cash from operations, $m
  229
  233
  237
  242
  247
  253
  260
  268
  276
  285
  273
  284
  295
  307
  320
  334
  348
  364
  380
  398
  416
  436
  456
  478
  501
  526
  551
  578
  607
  637
Maintenance CAPEX, $m
  -20
  -21
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
New CAPEX, $m
  -8
  -10
  -12
  -13
  -15
  -16
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -68
Cash from investing activities, $m
  -28
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -47
  -49
  -52
  -54
  -57
  -60
  -62
  -66
  -69
  -73
  -76
  -80
  -84
  -89
  -93
  -98
  -102
  -108
  -113
  -119
  -125
  -132
Free cash flow, $m
  201
  201
  203
  206
  210
  214
  219
  224
  230
  237
  222
  230
  238
  247
  257
  268
  279
  291
  304
  317
  332
  347
  363
  380
  398
  418
  438
  459
  482
  505
Issuance/(repayment) of debt, $m
  21
  23
  27
  30
  33
  36
  40
  43
  46
  50
  53
  57
  60
  64
  68
  72
  76
  81
  85
  90
  95
  100
  105
  111
  117
  123
  130
  136
  144
  151
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  21
  23
  27
  30
  33
  36
  40
  43
  46
  50
  53
  57
  60
  64
  68
  72
  76
  81
  85
  90
  95
  100
  105
  111
  117
  123
  130
  136
  144
  151
Total cash flow (excl. dividends), $m
  222
  225
  230
  236
  243
  250
  258
  267
  276
  286
  275
  286
  298
  311
  325
  340
  355
  372
  389
  407
  427
  447
  469
  491
  515
  541
  567
  596
  625
  656
Retained Cash Flow (-), $m
  -18
  -23
  -26
  -29
  -32
  -35
  -38
  -42
  -45
  -48
  -52
  -55
  -59
  -62
  -66
  -70
  -74
  -78
  -83
  -87
  -92
  -97
  -103
  -108
  -114
  -120
  -126
  -133
  -140
  -147
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  203
  202
  204
  207
  211
  215
  220
  225
  231
  238
  223
  231
  240
  249
  259
  270
  281
  293
  306
  320
  334
  350
  366
  383
  402
  421
  441
  463
  486
  510
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  195
  185
  178
  171
  163
  156
  148
  141
  133
  125
  106
  99
  91
  84
  76
  69
  61
  54
  47
  41
  35
  29
  24
  20
  16
  12
  9
  7
  5
  4
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Tetra Tech, Inc. is a provider of consulting, engineering, program management, construction management, and technical services. The Company's segments include Water, Environment and Infrastructure (WEI), Resource Management and Energy (RME), and Remediation and Construction Management (RCM). The WEI segment provides consulting and engineering services. The RME segment provides consulting and engineering services across the world for a range of resource management and energy needs. The Company includes wind-down of its non-core construction activities in the RCM segment. Its solutions span the entire life cycle of consulting and engineering projects and include applied science, research and technology, engineering, design, construction management, operations and maintenance, and information technology. It provides its services to a diverse base of international, the United States commercial, the United Sates federal clients.

FINANCIAL RATIOS  of  Tetra Tech, Inc. (TTEK)

Valuation Ratios
P/E Ratio 27.4
Price to Sales 1.6
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 23.4
Price to Free Cash Flow 25.2
Growth Rates
Sales Growth Rate 5.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -16.7%
Cap. Spend. - 3 Yr. Gr. Rate -12%
Financial Strength
Quick Ratio 12
Current Ratio 0
LT Debt to Equity 36.7%
Total Debt to Equity 38.5%
Interest Coverage 15
Management Effectiveness
Return On Assets 6.8%
Ret/ On Assets - 3 Yr. Avg. 5%
Return On Total Capital 9.4%
Ret/ On T. Cap. - 3 Yr. Avg. 6.8%
Return On Equity 13.1%
Return On Equity - 3 Yr. Avg. 9%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 17.4%
Gross Margin - 3 Yr. Avg. 17.6%
EBITDA Margin 11.3%
EBITDA Margin - 3 Yr. Avg. 9.5%
Operating Margin 9%
Oper. Margin - 3 Yr. Avg. 7.1%
Pre-Tax Margin 8.5%
Pre-Tax Margin - 3 Yr. Avg. 6.5%
Net Profit Margin 5.8%
Net Profit Margin - 3 Yr. Avg. 4.1%
Effective Tax Rate 31.4%
Eff/ Tax Rate - 3 Yr. Avg. 38.3%
Payout Ratio 18.6%

TTEK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TTEK stock intrinsic value calculation we used $2964 million for the last fiscal year's total revenue generated by Tetra Tech, Inc.. The default revenue input number comes from 0001 income statement of Tetra Tech, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our TTEK stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for TTEK is calculated based on our internal credit rating of Tetra Tech, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Tetra Tech, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of TTEK stock the variable cost ratio is equal to 91.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $57 million in the base year in the intrinsic value calculation for TTEK stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.5% for Tetra Tech, Inc..

Corporate tax rate of 27% is the nominal tax rate for Tetra Tech, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the TTEK stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for TTEK are equal to 15%.

Life of production assets of 21.8 years is the average useful life of capital assets used in Tetra Tech, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for TTEK is equal to 10.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $966.971 million for Tetra Tech, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 55.149 million for Tetra Tech, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Tetra Tech, Inc. at the current share price and the inputted number of shares is $3.2 billion.

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