After reading Tetra Tech, Inc.'s (NasdaqGS:TTEK) latest earnings update (29 December 2019), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether TTEK has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.
Could TTEK beat the long-term trend and outperform its industry?
TTEK's trailing twelve-month earnings (from 29 December 2019) of US$164m has jumped 23% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 22%, indicating the rate at which TTEK is growing has accelerated. How has it been able to do this? Let's see whether it is merely owing to an industry uplift, or if Tetra Tech has seen some company-specific growth.
In terms of returns from investment, Tetra Tech has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 7.6% exceeds the US Commercial Services industry of 6.0%, indicating Tetra Tech has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Tetra Tech’s debt level, has increased over the past 3 years from 12% to 13%.
What does this mean?
Tetra Tech's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that have performed well in the past, such as Tetra Tech gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Tetra Tech to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TTEK’s future growth? Take a look at our free research report of analyst consensus for TTEK’s outlook.
- Financial Health: Are TTEK’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 29 December 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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