Guru Zeke Ashton (Trades, Portfolio)'s Centaur Capital Partners bought a 140,000-share stake in Tetra Tech Inc. (TTEK, Financial) in the fourth quarter.
Tetra Tech is a leading provider of consulting, engineering, program management, construction management and technical services. The company supports government and commercial clients by providing innovative solutions focused on water, environment, infrastructure, resource management, energy and international development.
The company has 400 locations worldwide in Australia, Brazil, Canada, Chile, El Salvador, France, Germany, India, Kazakhstan, Mexico, Puerto Rico, Qatar, Thailand, the United Arab Emigrates and the United Kingdom.
Tetra Tech has a market cap of $1.63 billion, an enterprise value of $1.69 billion, a P/E ratio of 44.99 and a dividend yield of 1.15.
Tetra Tech was founded in 1966, and the company is celebrating its 50th anniversary. Tetra Tech began with 30 employees based in Pasadena, California, and now has 16,000 employees.
According to GuruFocus Tetra Tech has a profitability and growth rating of 6/10 with an operating margin of 3.69%, which ranks it lower than 59% of the 972 companies in the Global Engineering and Construction industry.
Tetra Tech has achieved some important milestones. In 1992 the U.S. Energy Department awarded Tetra Tech a nuclear weapons configuration contract. In 1993 the U.S. Air Force awarded it a nationwide National Environmental Policy Act contract. These are important because the relationship between Tetra Tech and U.S. federal, state and local government agencies are critical to the company's revenues.
In the first quarter of fiscal 2016, 42.2% of the company's revenue has come from contracts with U.S. federal and local government agencies, according to the company's most recent Q10 report.
One of the company's biggest concerns is the U.S. government failing to complete its budget and appropriations process before its fiscal year end, which could halt new spending initiatives. This could potentially delay the procurement of services and slow down the company's revenues and profits.
There is a significant amount of risk with U.S. government contracts; however, Tetra Tech is trading below the company's intrinsic value, and the book value has grown at an average annual rate of 10% over the previous 10 years. There are some inherent risks involved with the company; it has been able to steadily and successfully expand operations, which shows it is an efficient company that understands variance, volatility, and fluxuation within its industry.
Below is a Peter Lynch chart for Tetra Tech.
Ashton began to learn the fundamentals of value investing when he landed his first job working for Bear Stearns shortly after he dropped out of high school. After Ashton gained valuable experience working for Bear Stearns, he took a chance and moved to Europe where he spent the next six years working in treasury and risk management consulting for European banks.
Ashton gained valuable insight and experience while working overseas. He then decided to return to America and landed a job writing feature investment articles for the Motley Fool. In 2002, Ashton decided to found his own investing firm, Centaur Capital Partners, a firm that specializes in value oriented investment strategies.
Cheers to your investment success.
