Assessing Otis Worldwide (OTIS) Valuation After Montreal REM Transit Contract And Service Win

Otis Worldwide (OTIS) just wrapped up a major role in Montreal’s REM light metro, installing 22 escalators and 57 custom elevators, and securing a 5-year service contract that locks in ongoing maintenance revenue.

See our latest analysis for Otis Worldwide.

Despite project wins like REM, Otis Worldwide’s share price at US$88.34 has been relatively steady, with a 30 day share price return of 2.19% and a 1 year total shareholder return decline of 2.57%, while the 5 year total shareholder return of 43.52% points to value created over a longer horizon.

If this kind of infrastructure story interests you, it could be a good moment to see what else is out there in aerospace and defense stocks that is reshaping how people and goods move.

With the shares at US$88.34, a 5-year total return of 43.52%, and both sell-side targets and intrinsic value models indicating upside, the real question is whether there is still a buying opportunity here or if the market is already pricing in future growth.

Most Popular Narrative: 15% Undervalued

With Otis Worldwide closing at US$88.34 against a narrative fair value near US$104, the gap comes down to how you see future earnings power.

Significant cost-saving initiatives, including the UpLift and China transformation programs, are on track to deliver over $240 million in annual run-rate savings, improving operating leverage and underpinning stronger net margin and earnings growth even amid near-term pressure in new equipment sales.

Read the complete narrative.

Want to see what kind of revenue profile and margin uplift could justify that valuation gap? The narrative leans on steady top line progress, rising profitability and a higher future earnings multiple. The full story joins those pieces into one price tag.

Result: Fair Value of $103.96 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this depends on China and commercial real estate stabilising. Prolonged weakness in these areas could weigh on new equipment demand and pressure margins.

Find out about the key risks to this Otis Worldwide narrative.

Another View: What The P/E Ratio Is Saying

So far, the narrative fair value leans on earnings growth, margins and cash flows implying Otis Worldwide is undervalued. The P/E ratio tells a slightly different story.

At 25.6x earnings, Otis trades a touch above the US Machinery industry on 25.1x, yet sits well below a 34.1x peer average and our fair ratio estimate of 27.2x. That mix suggests some valuation risk if growth disappoints, but also room for the market to close the gap if the story plays out. Which side do you think investors will focus on next?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Otis Worldwide Narrative

If parts of this narrative do not quite fit how you see Otis, you can pull up the same data, test your own assumptions, and build a custom view in under three minutes with Do it your way.

A great starting point for your Otis Worldwide research is our analysis highlighting 2 key rewards and 2 important warning signs 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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