OTTER TAIL CORPORATION (OTTR): what the price requires

The current priced-in claim for OTTER TAIL CORPORATION (OTTR) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/OTTR

Headline

FieldValue
TickerOTTR
CompanyOTTER TAIL CORPORATION
Current price$89.26/sh
CompositionElectric 43% / Manufacturing 24% / Plastics 32%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed8.1%
Operating margin today27.1%
Margin compression implied-19.0pp
Multiple paid13x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 7.4% cost of capital with 4% terminal growth over a 5-year stage.

Reconcile: at the x-ray's 9.3% required return this reads ~2%/yr; the models below use their own rates.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.95σ
cohort percentile (of 70 peers)7
implied end-window share0%

Valuation X-Ray

The price is supported by asset-based and relative-multiple value, while growth-DCF lands below the price. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.08x5expensive
Earnings1.27x3expensive
Relative0.71x3justifies
Growth1.65x3expensive

Families that justify the price: Asset, Relative Families that call it expensive: Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.3%); the inversion above states its own rate.

Per-Model Detail (n=14)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$0.00—noFCF base $0.0B, growth -0% (input: historical growth), terminal g 0.5%, WACC 7.3%, 5yr projection
DCF Exit MultipleGrowth$60.501.48xyesExit EV/EBITDA: 7.8x / 9.8x / 11.8x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$129.100.69xyesP/E 20x (static sector reference · 2026-04), scenarios: 16.8x / 20.0x / 23.2x (bear / base = reference held flat / bull), EV/EBITDA 13x
Simple DDMGrowth——no—
Two-Stage DDMGrowth$28.903.09xyesStage 1: -5% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$72.051.24xyesBV/sh $45.35, ROE (TTM) 14.7%, ke 9.3%
Two-Stage Excess ReturnAsset$89.790.99xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$54.091.65xyesRev $1.3B, growth -0% (input: historical growth; tapered), Terminal P/S: 2.4x / 2.9x / 3.3x (bear / base = today's held flat / bull, cap 8x)
Growth-Adjusted P/ERelative——no—
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$70.051.27xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.36B × (1−21%) / WACC 7.3% → EPV (no growth)
Residual IncomeAsset$92.320.97xyesBV $45.35 + 5yr PV of (ROE (TTM) 14.7% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$82.431.08xyes√(22.5 × EPS $6.66 × BVPS $45.35) — Graham's conservative floor
EV/EBITDA RelativeRelative$124.990.71xyesEBITDA $0.47B × sector EV/EBITDA 13.0x
FCF YieldEarnings$0.018926.00xyesFCF $1.8M / Kₑ 9.3% — zero-growth perpetuity (excluded from median)
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$5.5816.00xyesEPS $6.66 × (8.5 + 2×-4.6%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$15.495.76xyesBV $45.35 × (ROIC 2.5% / WACC 7.3%)
P/Sales SectorRelative$78.071.14xyesRevenue $1.31B × sector P/S 2.5x
PEG Fair ValueRelative——no—
Earnings YieldEarnings$72.001.24xyesEPS $6.66 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$727.9m
Net debt / NOPAT (after-tax)2.54x
Net debt / operating income (pre-tax)2.00x
Interest coverage7.6x
Share count CAGR (dilution)0.1%
Burning cashno

Bullet Takeaways

Bull Case

Begin by framing what Otter Tail actually is, because the label hides the math. It is a small electric utility bolted to a highly profitable plastics (PVC pipe) manufacturer and a metal-fabrication arm, and the blend earns an operating margin near 26%, far above a normal regulated utility. Yet at $87.56 (June 27, 2026) the market pays only about 12x company-wide operating income, a multiple so low the model reads it as below what even a 5%-a-year operating-profit decline would warrant. The methods that value the business on its earnings and equity broadly clear the price: Relative Valuation at $129, EV/EBITDA Relative at $125, Two-Stage Excess Return at $90, Residual Income at $92, and the Graham Number at $82. When a profitable, partly regulated business prints those figures against a $87.56 price, the disconnect is the opportunity.

The regulated utility is the durable spine, and it is in a growth phase. Management reaffirmed a 10% compounded annual growth rate for the electric utility rate base over the next five years, supported by a $1.9 billion investment plan, and affirmed full-year diluted EPS guidance of $5.22 to $5.62 implying roughly a 12% return on equity (Otter Tail Q1 2026 transcript, Motley Fool). Rate-base growth at 10% is how a utility compounds earnings with regulatory protection, and a 12% return on equity is strong for the sector. The filings describe Otter Tail managing return on equity against internal thresholds and peer entities across its three reportable segments (FY2025 10-K, accession 0001466593-26-000008), which is the discipline of a management team that allocates capital to its highest-return uses.

The plastics segment, currently the drag, is also the embedded optionality. Even in a down-cycle, management has set a normalized annual earnings target of $45 million to $50 million for plastics by 2028, and near-term volumes are benefiting as distributors and contractors accelerate pipe purchasing ahead of announced PVC resin cost increases (Otter Tail Q1 2026, Simply Wall St). The balance sheet supports the whole thing: interest coverage is about 7.2x and net debt of roughly $728 million is modest. The bull case is that the market is over-discounting the plastics down-cycle and undervaluing a utility growing rate base at 10%, leaving a profitable, well-capitalized company at a single-digit-to-low-teens earnings multiple.

Bear Case

Lead with the qualitative truth the bull case dances around: a chunk of Otter Tail's recent earnings power came from an extraordinary PVC pipe cycle that is now unwinding, and the numbers are following it down. Plastics segment earnings fell $0.24 per share, or 24%, as average PVC pipe sales prices dropped 19% year over year, and management expects plastics earnings to keep declining through the end of 2027 (Otter Tail Q1 2026, Simply Wall St). The roughly 26% blended operating margin that makes the company look cheap is inflated by a plastics segment earning well above its normalized run rate. Value it on the $45 million to $50 million normalized plastics target rather than peak earnings, and the cheap multiple looks a lot more ordinary.

The price-to-fundamentals disconnect, in other words, may be the market correctly pricing mean reversion rather than missing value. The methods that look favorable lean on trailing earnings that include the plastics peak; as that segment reverts toward normalized levels through 2028, the earnings base the multiple is applied to shrinks. Management itself flagged the possibility of material variability from forecast levels in plastics, which is an honest admission that this segment is volatile and hard to forecast. A commodity-linked manufacturing business stapled to a utility introduces an earnings stream the market rightly refuses to capitalize at a utility multiple.

The utility, the supposed safe spine, carries its own risks. The $1.9 billion investment plan that drives the 10% rate-base growth requires regulatory approval of the rate increases that earn a return on it, and regulatory lag or an unfavorable commission outcome can erode the realized return on equity below the targeted 12%. The plan also requires financing, and a small utility funding $1.9 billion of capital while plastics earnings fall could face pressure on its balance sheet or need equity. The peer cohort is a mix of small utilities and gas names (Avista, Alliant, NorthWestern, UGI), which trade at utility multiples precisely because their earnings are stable; Otter Tail's plastics exposure is the reason it should arguably trade at a discount, not a premium. The bear case is that the discount is deserved: the earnings are part-cyclical, part-regulated, and the cyclical part is heading lower for two more years.

Valuation

Otter Tail is priced as if its earnings are about to fall, and the question is whether that discount is justified. The earnings and asset-based methods mostly sit above the $87.56 price (Relative Valuation $129, EV/EBITDA Relative $125, Residual Income $92, Two-Stage Excess Return $90, Graham Number $82, Earnings Power Value $70), while a few growth-oriented methods sit below it. Strip those out and the credible cluster sits at or above the price.

The inversion is the cleaner anchor. At $87.56 the market pays about 12x company-wide operating income, computed at a 7.5% cost of capital with 4% terminal growth, a multiple so low it falls below what even a 5%-a-year operating-profit decline would warrant. That is a bound, not a solved growth rate: the price embeds an assumption that operating profit erodes. The honest read splits the difference: on regulated-utility earnings growing rate base at 10%, the stock is cheap; on a normalized plastics segment earning $45 million to $50 million by 2028, the apparent discount narrows considerably. The market is pricing the down-cycle, and whether that is an opportunity or a fair adjustment depends on how far plastics earnings fall before they stabilize.

Catalysts

Otter Tail reported Q1 2026 results on May 5, 2026, affirming full-year diluted EPS guidance of $5.22 to $5.62 (roughly a 12% return on equity) and reaffirming a 10% compounded rate-base growth rate over five years backed by a $1.9 billion utility investment plan (Otter Tail Q1 2026 transcript, Motley Fool). Plastics segment earnings fell 24% as PVC pipe prices dropped 19% year over year, partially offset by higher volumes as buyers pulled forward purchases ahead of announced resin cost increases linked to Middle East conflict (Otter Tail Q1 2026, Simply Wall St).

The forward watch items split along the two businesses. On the utility side: regulatory proceedings and rate-case outcomes that determine whether the $1.9 billion plan earns its targeted return, and the financing of that capital program. On the plastics side: PVC pipe pricing and volumes, which management expects to keep declining through 2027 toward a normalized $45 million to $50 million annual run rate by 2028, with the path subject to material variability. Near term, the pull-forward of pipe purchases ahead of resin cost increases is a swing factor in either direction. The company also settled key PVC pipe antitrust claims, removing a legal overhang. The quarterly cadence of plastics earnings versus the normalized target is the single most important data point for whether the current discount closes or persists.

Peer Cohorts (Per Segment, With Filing Citations)

Electric (reported)

Manufacturing (reported)

Plastics (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive OTTR report on boothcheck