| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 55.41 | -33 |
| Intrinsic value (DCF) | 26.47 | -68 |
| Graham-Dodd Method | 47.04 | -43 |
| Graham Formula | 49.04 | -41 |
Otter Tail Corporation (NASDAQ: OTTR) is a diversified utility and manufacturing company operating in the United States, with a strong presence in the Upper Midwest. The company operates through three key segments: Electric, Manufacturing, and Plastics. Its Electric segment serves approximately 133,000 customers across Minnesota, North Dakota, and South Dakota, generating power through a mix of coal, wind, hydro, and natural gas. The Manufacturing segment specializes in contract machining, metal stamping, and plastic thermoformed products for industries such as agriculture, construction, and life sciences. The Plastics segment produces PVC pipes for municipal and rural water systems, wastewater management, and storm drainage. Founded in 1907 and headquartered in Fergus Falls, Minnesota, Otter Tail Corporation has evolved from a regional power provider into a diversified industrial player. With a market capitalization exceeding $3 billion, the company benefits from stable utility earnings while leveraging growth opportunities in manufacturing and infrastructure-related plastics. Its balanced business model provides resilience against sector-specific downturns, making it an intriguing investment in the utilities and industrial sectors.
Otter Tail Corporation presents a compelling investment case due to its diversified revenue streams, stable utility operations, and growth potential in manufacturing and plastics. The company's low beta (0.543) suggests defensive characteristics, appealing to risk-averse investors. With a trailing diluted EPS of $7.17 and a dividend yield supported by consistent cash flows, OTTR offers both income and moderate growth potential. However, risks include regulatory pressures on its electric utility segment, exposure to commodity price fluctuations in manufacturing, and capital-intensive operations requiring sustained infrastructure investments. The company's ability to maintain profitability (net income of $301.7M in the latest period) while funding growth capex ($358.7M) demonstrates disciplined capital allocation. Investors should monitor its transition toward renewable energy sources and competitive positioning in the PVC pipe market.
Otter Tail Corporation's competitive advantage stems from its strategic diversification across regulated utilities and industrial businesses. In the Electric segment, its regional monopoly status in service territories provides stable cash flows, while participation in MISO markets offers wholesale revenue opportunities. The company's generation mix (including wind and hydro) positions it favorably in the energy transition compared to coal-dependent peers. The Manufacturing segment competes through specialized capabilities in thermoforming and contract machining, serving niche industrial markets with customized solutions. Its Plastics segment benefits from long-term demand for water infrastructure, with PVC pipes being a cost-effective solution for municipal systems. However, competition is intense in both manufacturing (against larger industrial conglomerates) and plastics (facing rivals like JM Eagle). OTTR's smaller scale in manufacturing may limit economies of scale versus global competitors, while its utility operations face regulatory risks common to the sector. The company's ability to cross-sell products across segments (e.g., supplying plastic components to industrial customers) provides some differentiation. Its conservative balance sheet (with manageable debt levels) supports continued investment in growth areas while maintaining dividends.