TRC Companies, Inc. (TRR): How Is This Company Finally Turning Things Around?

Market-watchers and investors have widely divergent opinions about the emerging “green economy.” Many remain skeptical of eco-friendly start-ups’ business models and prefer to invest in larger, more established firms that innovate incrementally. Others believe that smaller firms are far more likely to discover and harness the sorts of disruptive, paradigm-shifting technologies that create value for investors and open up new markets for exploitation. Those who fall into the latter camp are more likely to make risky bets on unproven firms. While most such bets fail, those that succeed tend to pay off handsomely.

Of course, there is a sizable middle ground between innovative conglomerates like GE and promising but risky start-ups like Tesla Motors Inc (NASDAQ:TSLA). TRC Companies, Inc. (NYSE:TRR) clearly occupies this happy medium. The company engages in a rather boring mix of waste management services, electrical grid maintenance, energy-efficient infrastructure upgrades and other behind-the-scenes activities. Although the company was an early innovator in the now-hot “green economy,” it has struggled to post robust profits and has seen more than its fair share of stock-price volatility. Amid signs that TRC Companies, Inc. (NYSE:TRR) may finally be turning a corner and preparing for a new phase of growth and development, investors would do well to peel back the curtain on this often-overlooked firm.

TRC Companies and the Competition

Despite its diversified operational portfolio, TRC Companies, Inc. (NYSE:TRR) is a rather small firm. Many of its larger competitors concentrate the bulk of their manpower on more profitable or lucrative operations and regard waste management or infrastructure maintenance as loss-leading niche businesses. Nevertheless, larger firms like URS Corp (NYSE:URS) and AECOM Technology Corp (NYSE:ACM) bring considerable heft to these areas of operation and force TRC to innovate constantly.

With a market capitalization of about $225 million and an enterprise value of roughly $200 million, Windsor, Connecticut-based TRC Companies, Inc. (NYSE:TRR) is much smaller than URS Corp (NYSE:URS) or AECOM Technology Corp (NYSE:ACM). For its part, URS Corp (NYSE:URS) has a market cap of $3.5 billion and an enterprise value of $5.4 billion. AECOM’s $3.3 billion market cap and $4 billion enterprise value give it ample weight as well.

TRC Companies, Inc. (NYSE:TRR)’s diminutive size does not render it incapable of turning a profit. In 2012, the company earned $17.3 million on total revenues of $313 million. This made for a decent profit margin of about 5.5 percent. URS was only able to eke out a narrow profit of $302.8 million on $11.4 billion in gross revenues, and AECOM Technology Corp (NYSE:ACM) lost about $63.5 million on revenues of $8.2 billion. Meanwhile, TRC has a debt load of $7.8 million and a cash reserve of $10 million. URS has debts of over $2 billion and cash reserves of just under $250 million, and AECOM’s debt load is roughly double the size of its cash reserve.

Recent Price Action

TRC is near the high end of a wide and highly volatile trading range. Over the past two years, the company has traded between a high of $8.30 per share and a low of about $2.70 per share. Its deepest dive came during the second half of 2011, and its recent high was notched during the opening months of 2013. Although most market-watchers would argue that the company’s technical action has generally been favorable since its sub-$3 run, TRC Companies, Inc. (NYSE:TRR)’s recent price action suggests a slight downward trend.