Did Otis Worldwide's (NYSE:OTIS) Share Price Deserve to Gain 51%?

By
Simply Wall St
Published
March 26, 2021
NYSE:OTIS

We believe investing is smart because history shows that stock markets go higher in the long term. But if when you choose to buy stocks, some of them will be below average performers. Unfortunately for shareholders, while the Otis Worldwide Corporation (NYSE:OTIS) share price is up 51% in the last year, that falls short of the market return. Otis Worldwide hasn't been listed for long, so it's still not clear if it is a long term winner.

View our latest analysis for Otis Worldwide

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last year, Otis Worldwide actually saw its earnings per share drop 19%.

So we don't think that investors are paying too much attention to EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

We are skeptical of the suggestion that the 1.2% dividend yield would entice buyers to the stock. Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
NYSE:OTIS Earnings and Revenue Growth March 26th 2021

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Otis Worldwide in this interactive graph of future profit estimates.

A Different Perspective

We're happy to report that Otis Worldwide are up 53% over the year (even including dividends). Unfortunately this falls short of the market return of around 60%. That's a lot better than the more recent three month gain of 3.1%, implying that share price has plateaued recently, for now. It seems likely the market is waiting on fundamental developments with the business before pushing the share price higher (or lower). While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Otis Worldwide (at least 1 which is concerning) , and understanding them should be part of your investment process.

Otis Worldwide is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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