Otter Tail (OTTR) shares have been on the move recently, following a stretch in which the company posted modest revenue growth along with a decline in annual net income. Investors are watching to see how management responds.
After a steady run earlier this year, Otter Tail’s share price has recently cooled off, with gains year-to-date now sitting at 6.6%. Despite some short-term dips, the company’s one-year total shareholder return remains positive, and its three- and five-year returns highlight solid longer-term momentum.
With shares pulling back from earlier highs, investors must decide whether Otter Tail is currently trading below its true worth or if the company’s future prospects are already reflected in the price. Is there real upside left?
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Most Popular Narrative: 7% Undervalued
Otter Tail's most popular narrative view puts fair value at $83, slightly above its last close of $77.22. This provides a modest edge for bulls, but one that depends on a handful of critical growth and earnings assumptions.
Ongoing and possibly intensifying environmental regulations, despite recent EPA reconsiderations, pose continued risk to Otter Tail's coal assets. This could lead to elevated compliance costs, unplanned capital expenditures, and stranded asset charges, compressing net margins and long-term return on equity.
Do Otter Tail’s coal-era challenges and regulatory twists drive or stall this valuation? There is a single financial forecast at the heart of the narrative. Curious which expectation tips the balance? The surprising detail behind analyst fair value might upend your outlook. See the narrative before the numbers move again.
However, rapid new load growth or higher-than-expected earnings resilience could challenge the cautious case and keep Otter Tail’s value momentum alive.
Another View: Value Signals from Earnings Multiples
Taking a fresh look using the market's favored price-to-earnings ratio, Otter Tail trades at 11.3x, well beneath US Electric Utilities peers at 21.2x and below the fair ratio of 12.8x. This low multiple suggests the stock could be undervalued, but why is the market discounting it so sharply? Could hidden risks or overlooked strengths tip the balance?
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Otter Tail for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 840 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Build Your Own Otter Tail Narrative
If this analysis doesn’t fully match your view, or you prefer to dig into the numbers yourself, you can build your own interpretation in just a few minutes. Do it your way
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This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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