Over the past six months, Tetra Tech’s shares (currently trading at $35.32) have posted a disappointing 17.7% loss while the S&P 500 was down 1.8%. This may have investors wondering how to approach the situation.

Following the drawdown, is now the time to buy TTEK? Find out in our full research report, it’s free.

Why Does TTEK Stock Spark Debate?

With a 50-year legacy of "Leading with Science" and operations on all seven continents, Tetra Tech (NASDAQ: TTEK) provides high-end consulting and engineering services focused on water management, environmental solutions, and sustainable infrastructure for government and commercial clients worldwide.

Two Positive Attributes:

1. Skyrocketing Revenue Shows Strong Momentum

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Luckily, Tetra Tech’s sales grew at an exceptional 13.2% compounded annual growth rate over the last five years. Its growth surpassed the average business services company and shows its offerings resonate with customers.

2. Surging Backlog Locks In Future Sales

In addition to reported revenue, backlog is a useful data point for analyzing Industrial & Environmental Services companies. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into Tetra Tech’s future revenue streams.

Tetra Tech’s backlog punched in at $4.31 billion in the latest quarter, and over the last two years, its year-on-year growth averaged 15.6%. This performance was fantastic and shows the company has a robust sales pipeline because it is accumulating more orders than it can fulfill. Its growth also suggests that customers are committing to Tetra Tech for the long term, enhancing the business’s predictability.

One Reason to be Careful:

Free Cash Flow Margin Dropping

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

As you can see below, Tetra Tech’s margin dropped by 8.7 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. Tetra Tech’s free cash flow margin for the trailing 12 months was 5.1%.

Final Judgment

Tetra Tech’s positive characteristics outweigh the negatives. After the recent drawdown, the stock trades at 24.6× forward P/E (or $35.32 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.

Stocks We Like Even More Than Tetra Tech

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