With a daily gain of 11.28%, a 3-month loss of -2.87%, and an Earnings Per Share (EPS) (EPS) of 6.45, Otter Tail Corp (OTTR, Financial) emerges as a stock to watch. The question is, is it fairly valued? This article aims to answer that by providing a comprehensive analysis of the company's valuation. Read on to delve deeper into the financial intricacies of Otter Tail.
Company Overview
Otter Tail Corp (OTTR, Financial) is a U.S. energy company with primary operations in the electric, manufacturing, and plastics segments. The company produces and sells electricity, fabricates metal components, and manufactures pipes for water uses. Its operations are mostly concentrated in the states of Minnesota, South Dakota, and North Dakota. The majority of the company's revenue is derived from the Electric segment and commercial customers.
At its current price of $77.63 per share, Otter Tail has a market cap of $3.20 billion. Compared to the GF Value of $72.71, the stock seems to be fairly valued. The following analysis will provide a more profound exploration of the company's value.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future estimates of business performance. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at.
If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher. Based on this calculation, Otter Tail gives every indication of being fairly valued. As a result, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength Analysis
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, an investor must review a company's financial strength before deciding to purchase shares. Otter Tail has a cash-to-debt ratio of 0.17, which ranks worse than 60.91% of 486 companies in the Utilities - Regulated industry. The overall financial strength of Otter Tail is 5 out of 10, indicating that it is fair.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. Otter Tail has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $1.40 billion and an Earnings Per Share (EPS) of $6.45. Its operating margin is 26.27%, which ranks better than 81.78% of 505 companies in the Utilities - Regulated industry. Overall, the profitability of Otter Tail is ranked 8 out of 10, indicating strong profitability.
One of the most important factors in the valuation of a company is its growth. The average annual revenue growth of Otter Tail is14.8%, which ranks better than 73.87% of 486 companies in the Utilities - Regulated industry. The 3-year average EBITDA growth is 29.4%, which ranks better than 90.22% of 460 companies in the Utilities - Regulated industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Otter Tail's ROIC is 10.8 while its WACC came in at 7.77.
Conclusion
In summary, the stock of Otter Tail (OTTR, Financial) gives every indication of being fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 90.22% of 460 companies in the Utilities - Regulated industry. To learn more about Otter Tail stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
