Saturday, 18 November 2017
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Critical Review: Tetra Tech (TTEK) and Waste Management (WM)


Tetra Tech (NASDAQ: TTEK) and Waste Management (NYSE:WM) are both mid-cap industrial products companies, but which is the superior stock? We will compare the two businesses based on the strength of their profitability, risk, institutional ownership, valuation, earnings, analyst recommendations and dividends.

Earnings and Valuation

This table compares Tetra Tech and Waste Management’s revenue, earnings per share and valuation.

Gross RevenuePrice/Sales RatioEBITDAEarnings Per SharePrice/Earnings Ratio
Tetra Tech$2.03 billion1.16$216.70 million$1.9721.17
Waste Management$14.13 billion2.35$3.86 billion$2.9125.96

Waste Management has higher revenue and earnings than Tetra Tech. Tetra Tech is trading at a lower price-to-earnings ratio than Waste Management, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

85.3% of Tetra Tech shares are held by institutional investors. Comparatively, 75.5% of Waste Management shares are held by institutional investors. 4.0% of Tetra Tech shares are held by company insiders. Comparatively, 0.2% of Waste Management shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of recent ratings and price targets for Tetra Tech and Waste Management, as provided by MarketBeat.

Sell RatingsHold RatingsBuy RatingsStrong Buy RatingsRating Score
Tetra Tech03402.57
Waste Management13602.50

Tetra Tech presently has a consensus price target of $49.57, indicating a potential upside of 18.88%. Waste Management has a consensus price target of $75.00, indicating a potential downside of 0.73%. Given Tetra Tech’s stronger consensus rating and higher possible upside, analysts plainly believe Tetra Tech is more favorable than Waste Management.

Dividends

Tetra Tech pays an annual dividend of $0.40 per share and has a dividend yield of 1.0%. Waste Management pays an annual dividend of $1.70 per share and has a dividend yield of 2.3%. Tetra Tech pays out 20.3% of its earnings in the form of a dividend. Waste Management pays out 58.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Waste Management has raised its dividend for 13 consecutive years. Waste Management is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

Tetra Tech has a beta of 1.03, indicating that its share price is 3% more volatile than the S&P 500. Comparatively, Waste Management has a beta of 0.71, indicating that its share price is 29% less volatile than the S&P 500.

Profitability

This table compares Tetra Tech and Waste Management’s net margins, return on equity and return on assets.

Net MarginsReturn on EquityReturn on Assets
Tetra Tech4.17%13.65%6.73%
Waste Management9.18%25.07%6.56%

Summary

Waste Management beats Tetra Tech on 10 of the 17 factors compared between the two stocks.

About Tetra Tech

Tetra Tech, Inc. is a provider of consulting, engineering, program management, construction management, and technical services. The Company’s segments include Water, Environment and Infrastructure (WEI), Resource Management and Energy (RME), and Remediation and Construction Management (RCM). The WEI segment provides consulting and engineering services. The RME segment provides consulting and engineering services across the world for a range of resource management and energy needs. The Company includes wind-down of its non-core construction activities in the RCM segment. Its solutions span the entire life cycle of consulting and engineering projects and include applied science, research and technology, engineering, design, construction management, operations and maintenance, and information technology. It provides its services to a diverse base of international, the United States commercial, the United Sates federal clients.

About Waste Management

Waste Management, Inc. (WM) is a holding company. The Company, through its subsidiaries, is a provider of waste management environmental services. The Company’s segments include Solid Waste and Other. The Company’s Solid Waste segment includes its solid waste business. The Other segment includes its Strategic Business Solutions (WMSBS) organization; its landfill gas-to-energy operations and third-party subcontract and administration services managed by its Energy and Environmental Services and WM Renewable Energy organizations; its recycling brokerage services, and its service offerings and solutions, such as portable self-storage and long distance moving services, fluorescent lamp recycling and interests it holds in oil and gas producing properties. As of December 31, 2016, the Company owned or operated 243 solid waste landfills and five secure hazardous waste landfills. Its recycling brokerage services involve managing the marketing of recyclable materials for third parties.

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