Otter Tail (OTTR) Raises Full-Year Outlook: What the Latest Guidance Means for Valuation
Otter Tail (OTTR) just raised its full-year earnings guidance after reporting its third quarter results, reflecting growing confidence in how the business is performing. This update arrives along with a reaffirmed quarterly dividend.
See our latest analysis for Otter Tail.
Otter Tail’s momentum has picked up notably, with a 1-month share price return of nearly 13% driving its total shareholder return over the past year to 6.7%. While the latest earnings guidance and steady dividend have helped bolster sentiment, the bigger story is that investors who stuck with the stock over the last five years have more than doubled their money, enjoying a 128% total shareholder return.
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Still, with shares surging in the past month and the company trading just above analyst price targets, the key question is whether Otter Tail remains undervalued or if today’s price already reflects its growth story.
Most Popular Narrative: Fairly Valued
With Otter Tail closing at $84.70 and the most widely followed narrative setting fair value at $83.00, the market and consensus are practically side by side. The spotlight now turns to the factors behind this equilibrium and the assumptions driving analyst expectations.
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.
Why do analysts think Otter Tail deserves this price tag? The story hinges on shifting industry regulations and dramatic changes to the company’s long-term profitability. One headline financial forecast could be the deciding factor. Want to see what’s driving the valuation math? The answer awaits in the full narrative.
Result: Fair Value of $83.00 (ABOUT RIGHT)
Have a read of the narrative in full and understand what's behind the forecasts.
However, a major new industrial contract or stronger-than-expected demand could change current forecasts and lead to higher earnings growth for Otter Tail.
Find out about the key risks to this Otter Tail narrative.
Another View: What Market Multiples Say
Looking beyond analyst price targets, Otter Tail currently trades at a price-to-earnings ratio of 12.7x. This is compelling when measured against peers averaging 25x and the US electric utilities industry at 20.5x. Even our fair ratio model lands right alongside at 12.8x, signaling that investors may have already priced in much of the risk and potential. Could the market be spot on, or is there room for surprise moves ahead?
See what the numbers say about this price — find out in our valuation breakdown.
Build Your Own Otter Tail Narrative
If you see the story differently or want a fresh perspective, you can shape your own Otter Tail narrative effortlessly in just a few minutes. Do it your way
A great starting point for your Otter Tail research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.
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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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