Tetra Tech (NASDAQ: TTEK), an American consulting and engineering services firm, experienced a decline of more than 30% in its stock in less than 30 days by the end of February amid growing market concerns over trade tensions.
Is this dip a buying opportunity? Purchasing during a dip can be a viable strategy for quality stocks when overall market conditions are favorable, provided the stock has a proven history of recovery. In fact, Tetra Tech not only meets basic fundamental quality checks but has also delivered an average return of 56% over one year and achieved a peak return of 61% following past dips.
Current Dip Opportunity
It has been under one month since TTEK last experienced a drop exceeding 30% within 30 days, and since then, it has recovered by 2.8%. The table below provides details on historical median values:
Historical Data on Recovery from Dips
TTEK has experienced two events since 1/1/2020 in which the dip threshold of -30% within 30 days was reached.
- 61% is the median peak return within one year of a dip event
- 167 days represent the median time to achieve peak return after a dip event
- -1.6% is the median maximum drawdown within one year following a dip event
Tetra Tech Meets Basic Financial Quality Standards
Evaluating revenue growth, profitability, cash flow, and balance sheet strength is essential to ensure that a dip does not signal a deteriorating business condition.
Although dip buying can be appealing, it must be carefully assessed from various perspectives. This multifactor approach is exactly how we develop Trefis portfolio strategies. For a smoother ride compared to individual stocks while still enjoying upside potential, consider the High-Quality portfolio, which has outperformed the S&P and achieved returns greater than 91% since its inception.
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