Otter Tail Corporation (OTTR) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Otter Tail Corporation (OTTR)

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Intrinsic Value (DCF)

Current$88.29
Intrinsic$61.94
-30%
$36.72$61.94$109.80
Market implies 33% growth for 5 years
OTTR trades at a premium to our conservative estimate — investors expect above-average performance.
At $88, the market prices in continued strong cash flow growth (33%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $37 → Bull $110. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →21%23%25%27%
8%$80$88$96$105
10%$51$56$62$68
12%$35$39$43$47
14%$25$28$31$34

Bull Case

  • Bull case ($110) offers 24% upside at 30% growth, 9% discount

Bear Case

  • Bear case ($37) implies 58% downside at 20% growth, 12% discount
  • Price reflects 33% growth expectations vs 25% historical — high bar to clear
  • Trading 30% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$117.60M
Year 2$147.00M
Year 3$183.75M
Year 4$229.69M
Year 5$287.11M
Terminal$4.22B

📐 Model Inputs

Growth Rate25.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$94.08MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. Regulated returns may affect assumptions. See FAQ below for full methodology.

Frequently Asked Questions

Is OTTR stock undervalued or overvalued?
🔴 OVERVALUED

OTTR trades at $88.29 vs. our DCF-derived intrinsic value of $48.38, implying -41% downside. Using a 10.0% WACC and 25.0% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($81.55) suggests limited upside.

What is OTTR's intrinsic value?

Using a 5-year DCF model: Base FCF of $94M, projected at 25.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $719M net debt and dividing by 0.04B shares: Bear $25.86 | Base $48.38 | Bull $81.55. Current price $88.29 implies -41% to base case.

How is OTTR's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 25.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($2.75B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 29.3x.