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Otis (OTIS) Stock Still Looks Undervalued As Shares Fall 22% YTD

Simply Wall St · 2d ago

Otis Worldwide shares have fallen sharply so far this year, and with the stock recently closing at US$68.50 the key issue is whether that price still lines up with the cash the business is expected to generate over time. For investors, the immediate puzzle is how the current market value compares with what a Discounted Cash Flow (DCF) view of Otis Worldwide suggests its future cash streams might be worth.

  • The share price is down 22.5% year to date, which puts fresh focus on whether the recent slide has brought Otis Worldwide closer to or further from the value implied by its cash flows.
  • The planned CEO succession running through to 2027 may influence how consistently management can convert Otis Worldwide’s order book into cash, which can affect both the timing and durability of its future cash generation.
  • If you'd rather focus on earnings, this one's for you. See what Otis Worldwide's 17.2x P/E says about the price.

The issue now is whether the cash flows that Otis Worldwide is expected to produce can justify the share price investors are paying today.

If you are weighing Otis Worldwide through the lens of its cash flows and recent share price slide, it can help to compare it with other businesses screened using 34 high quality undervalued stocks

Is Otis Worldwide Still Cheap on Cash Flow?

The Discounted Cash Flow (DCF) model here uses a 2 Stage Free Cash Flow to Equity approach to value Otis Worldwide on the cash it is projected to return to shareholders over time. On the latest twelve month view, Otis Worldwide generated free cash flow of about $1.72b. Analysts expect that figure to grow over the coming years, with the model assuming a steady expansion in dollar free cash flows rather than a sharp step change.

Those cash flow projections, when discounted back, suggest an intrinsic worth that sits substantially above the current US$68.50 share price. The long planned CEO succession running through to 2027 helps explain why the market might be cautious on how reliably those projected cash flows are delivered, even though the DCF still supports a higher value based on current assumptions. Find out what Otis Worldwide could be worth using our Discounted Cash Flow (DCF) estimate.

The Otis Worldwide Narrative: What Would Justify Today's Price?

Simply Wall St Narratives pick up where the DCF question for Otis Worldwide leaves off and explain which paths for revenue growth, margins and earnings would need to hold for the stock to be worth significantly more or significantly less than today’s price, using scenarios that sit on the Community page. Each view links its figures to a concrete stance on how Otis Worldwide's growth, profitability and risk profile might evolve, giving you something specific to revisit as fresh data becomes available.

One of the top community narratives on Otis Worldwide: 23% undervalued

"Modernization and global service expansion drive high-margin recurring revenue, leveraging aging infrastructure trends and strong customer retention for sustained growth..."

Discover why this Narrative puts Otis Worldwide at 23% undervalued.

One more piece of the Otis Worldwide story to check before you move on

Cash flow and valuation only tell part of the picture for Otis Worldwide, because the research checks have also flagged potential pressure points that deserve a closer look before drawing your own conclusion. Take a closer look at 2 warning signs (1 major) before settling on a valuation.

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.