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Fundamental Analysis: OTTER TAIL CORPORATION (#OTTR)

Otter Tail (#OTTR) is an American power generation and utility company. The businessis mainly concentrated in the northern states of Minnesota, North Dakota and South Dakota. The company is also engaged in the production of plastics. We consider this stock as a good purchase for an "Optimal risk" portfolio at $ 40.51.

Key factors:

💡 Positive results for 3d quarter of 2020.

The company increased revenue by 3.1% on the annual rate reaching gross margin of $235.8 million.

EBITDA increased by 45.2% to $35.9 million.

Earnings per share rose to $0.87, from $0.62 a year earlier.

💡 #OTTR demonstrated high profitability and good dividend income in comparison to industry averages. The economic multiplier ROE at the end of the quarter was 12.13% against the average 9.24 % of the sector.

The dividend income rate of the company is about 3.62%, against the average 3.35% of the sector.

💡 Otter Tail is constantly investing to modernise and support existing infrastructure: the investment program for the next 4 years is $898 million.

Current and planned future investments will help the company improve its business, which will have, on the long run, a direct positive impact on the cash flow streams.

On this assumption, dividend payouts might be considered for the long term: at the moment the company is giving a dividend yield of 3.53%

Based on the good results, we believe the higher competition and the cyclicality of raw materials prices , main risks of the industry, will be overcome by Otter Tail Corporation.

As of today, the company is trading below the fair value of $ 83

OTB Global Investments

27 November 2020

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