Tetra Tech: Strong Market, Overlooked Stock

Aug. 1.06 | About: Tetra Tech, (TTEK)

The last few months have been difficult for Tetra Tech (NASDAQ:TTEK), which is exactly why I think it’s finally time to buy. Founded in 1966 and located in Pasadena, Tetra Tech offers its clients consulting, engineering, and technical services for environmental issues. Clients include corporations as well as local, state, and federal government agencies.

The company operates in three segments. The Resource Management focuses on water quality and availability, environmental restoration, and the maximal reuse of waste. The Infrastructure segment provides engineering, program management, and construction management services for the additional development, upgrade, and replacement of existing civil and security infrastructure to both public and private organizations. The Communications segment provides network planning, engineering, site acquisition, construction, and construction management services to telecommunications companies, wireless service providers, and cable operators.

These diverse offerings promise a steady revenue stream for years to come. Companies are growing more interested in being eco-friendly, and they are increasingly turning to companies like Tetra Tech for guidance. Meanwhile, there is always going to be a reliable demand from government agencies that always have environmental issues, from planning and development to cleanups.

Tetra Tech’s revenues have been down a bit over the last year; I believe this comes from greater competition as the growing environmental consulting sector continues to attract new companies. My guess is this is what has driven down the price of the stock. Given that Tetra Tech has a good reputation in the field and a long history of service, I see this as just a blip. Indeed, the first two quarters of 2006 were stronger than the comparable quarters of 2005, and the past two weeks have seen Tetra Tech announcing deals that will bring more than a billion dollars in revenues. This is a company with real potential for growth, and now is the time to grab it.

Type of stock: An established environmental-consulting company that is going experience tremendous growth as up and coming legislation and tax incentives work in their favor. At the very least, Tetra Tech represents a acquisition target for the soon-to-be consolidated sector.

Price target: Currently trading at $15 after dropping from above $20 just three months ago, this is a good buy now.