Tetra Tech Inc’s (NASDAQ:TTEK) latest earnings update in September 2018 confirmed that the company experienced a strong tailwind, eventuating to a double-digit earnings growth of 16%. Below is a brief commentary on my key takeaways on how market analysts predict Tetra Tech’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts’ outlook for next year seems buoyant, with earnings climbing by a robust 17%. This growth seems to continue into the following year with rates reaching double digit 25% compared to today’s earnings, and finally hitting US$201m by 2021.
While it’s useful to be aware of the growth rate year by year relative to today’s figure, it may be more beneficial to determine the rate at which the business is moving on average every year. The benefit of this technique is that we can get a better picture of the direction of Tetra Tech’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 11%. This means, we can expect Tetra Tech will grow its earnings by 11% every year for the next couple of years.
For Tetra Tech, there are three relevant factors you should look at:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is TTEK worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether TTEK is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of TTEK? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.