Otis Worldwide Corp (OTIS)

Conclusion

Otis Worldwide designs, manufactures, installs and services elevators and escalators through a New Equipment segment and a Service segment. At 78.77 USD on 2026-11-09, the company has a market capitalisation of 30.0 billion USD and an enterprise value of 37.8 billion USD.

The verdict is fair. The fair value band runs from 74.04 to 111.05 USD with a midpoint of 92.55 USD, a margin of safety of 17.5%. The DCF gives 79.87 USD per share, and the fair value from historical multiples is 105.22 USD. Today's P/E of 19.3 compares with a ten-year median of 27.3, a premium of -29.4%, and EV/EBITDA of 15.2 compares with a median of 18.7, a premium of -18.8%. The reverse DCF implies 5.3% annual growth, against revenue growth of 2.5% a year over five years and EPS growth of 11.0%.

The case rests on returns and cash generation: ROIC of 72.9% against a WACC of 8.0%, free cash flow conversion of 107.5% over the last twelve months, and interest coverage of 10.7x. The weakest numbers are the insolvency risk, which the Ohlson estimate puts at high, about 30.0%, net debt to EBITDA of 3.14x, and a current ratio of 0.86.

Financial health

Financial strength is green, held up by an Altman Z-score of 3.00 and interest coverage of 10.7x, while net debt to EBITDA of 3.14x and a current ratio of 0.86 are only neutral. The quick ratio is 0.61. Debt to equity is not available because the company has negative equity. The Altman Z-score of 3.00 places the company in the safe zone. The Altman model was designed for manufacturers, and Otis manufactures most of what it sells, though it also earns much of its revenue from servicing. Insolvency risk: high, about 30.0% by the estimate of the Ohlson model over one to two years. This estimate points in the opposite direction to the Altman Z-score, and the reader should weigh the two together.

Earnings quality

Earnings quality is green. Free cash flow conversion is 107.5% over the last twelve months and 106.9% over five years, and the accrual ratio is -1.9%, which means cash earnings are running ahead of reported earnings. Stock-based compensation is 0.5% of revenue, and free cash flow after it is 1.6 billion USD. The share count fell at a compound rate of 2.0% over five years, which reflects buybacks. The Piotroski score is 6 out of 9. The Beneish M-score is not available. Over the last eight quarters the company beat estimates five times and missed twice, with an average surprise of 1.2%. Estimate revisions are negative: the current-year estimate changed by -0.0% over 90 days, and the next-year estimate changed by -2.7%, with three downward revisions against two upward in the last 30 days.

Profitability

Profitability is green. The gross margin is 29.9% against a ten-year median of 29.5%, the operating margin 15.4% against 14.7%, and the net margin 10.3% against 8.7%. Operating margin stability is 5.4%. ROIC of 72.9% compares with a WACC of 8.0%, and the given ROIC minus WACC value is 64.9%, which the model labels as creating value. The five-year median ROIC is 96.8%. Return on equity is not available because equity is negative, so leverage cannot be separated out through the usual route. The DuPont split for 2025 shows a net margin of 9.6% and an asset turnover of 1.35x, so the returns come from operations rather than from financial leverage.

Growth

Growth is green. Revenue grew at a compound rate of 1.8% over three years and 2.5% over five years, and EPS grew at 5.9% and 11.0%. Free cash flow per share grew at 2.4% over three years and 4.2% over five. Revenue rose in six of the eight comparable years. The next-year EPS growth estimate is 10.4%, which is above the five-year revenue growth but well below the five-year EPS growth.

Valuation

Valuation is yellow. Against their own ten-year medians, the current multiples are at discounts: P/E 19.3 against 27.3 (premium -29.4%), EV/EBITDA 15.2 against 18.7 (premium -18.8%), P/FCF 17.9 against 24.7 (premium -27.5%), and P/S 2.0 against 2.5 (premium -21.8%). The DCF gives 79.87 USD per share, using a discount rate of 9.23%, a near-term growth rate of 6.4% and a long-term growth rate of 2.5%. The terminal value accounts for 55.3% of the DCF. The fair value band is an order-of-magnitude estimate built on fixed assumptions, including a 5% equity risk premium and capped growth. It is not a price target. The reverse DCF implies 5.3% growth, set against the 2.5% revenue growth and 11.0% EPS growth delivered over five years. The dividend yield is 2.2% and the payout on free cash flow is 39.6%.

Risks

The insolvency risk is the most serious weakness: the Ohlson estimate places it at high, about 30.0%, even though the Altman Z-score is 3.00. Net debt to EBITDA of 3.14x leaves less room for error in earnings, and a current ratio of 0.86 means current liabilities exceed current assets. Negative equity is the reason debt to equity and return on equity are not available. Estimate revisions for the next year are negative, and a further cut would weaken the growth case that the reverse DCF already depends on. The Beneish M-score is not available, so manipulation risk cannot be tested with this data. This analysis has no debt maturity schedule and no revenue split by segment, so it cannot show when refinancing falls due or which segment drives growth.