Analyzing Otter Tail (NASDAQ:OTTR) & Fortis (NASDAQ:FTS)

Otter Tail (NASDAQ:OTTR) and Fortis (NYSE:FTS) are both utilities companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, institutional ownership, dividends, risk, valuation, profitability and analyst recommendations.

Profitability

This table compares Otter Tail and Fortis’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Otter Tail 8.57% 10.78% 3.82%
Fortis 12.72% 6.80% 2.19%

Valuation and Earnings

This table compares Otter Tail and Fortis’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Otter Tail $916.45 million 2.14 $82.35 million $2.06 23.96
Fortis $6.44 billion 2.75 $899.56 million $1.91 21.27

Fortis has higher revenue and earnings than Otter Tail. Fortis is trading at a lower price-to-earnings ratio than Otter Tail, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

43.4% of Otter Tail shares are owned by institutional investors. Comparatively, 52.1% of Fortis shares are owned by institutional investors. 1.7% of Otter Tail shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Dividends

Otter Tail pays an annual dividend of $1.40 per share and has a dividend yield of 2.8%. Fortis pays an annual dividend of $1.36 per share and has a dividend yield of 3.3%. Otter Tail pays out 68.0% of its earnings in the form of a dividend. Fortis pays out 71.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Otter Tail has raised its dividend for 5 consecutive years and Fortis has raised its dividend for 2 consecutive years.

Analyst Ratings

This is a breakdown of current ratings and target prices for Otter Tail and Fortis, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Otter Tail 0 0 1 0 3.00
Fortis 1 4 4 0 2.33

Otter Tail currently has a consensus price target of $60.00, suggesting a potential upside of 21.58%. Fortis has a consensus price target of $53.00, suggesting a potential upside of 30.48%. Given Fortis’ higher possible upside, analysts plainly believe Fortis is more favorable than Otter Tail.

Volatility & Risk

Otter Tail has a beta of 0.35, indicating that its share price is 65% less volatile than the S&P 500. Comparatively, Fortis has a beta of 0.18, indicating that its share price is 82% less volatile than the S&P 500.

Summary

Otter Tail beats Fortis on 9 of the 17 factors compared between the two stocks.

About Otter Tail

Otter Tail Corporation, together with its subsidiaries, engages in electric, manufacturing, and plastics businesses in the United States. The company's Electric segment produces, transmits, distributes, and sells electric energy in Minnesota, North Dakota, and South Dakota; and operates as a participant in the Midcontinent Independent System Operator, Inc. markets. This segment generates electricity through coal, wind and hydro, and natural gas and oil sources. It serves approximately 130,000 residential, commercial, industrial, and other customers. Otter Tail Corporation's Manufacturing segment stamps, fabricates, welds, paints, and laser cuts metal components for use in the recreational vehicle, agricultural, oil and gas, lawn and garden, industrial equipment, health and fitness, and enclosure industries; manufactures and fabricates parts for off-road equipment, mining machinery, oil fields and offshore oil rigs, wind industry components, broadcast antennae, and farm equipment; and provides laser cutting services and stamping to weldments and assemblies for metal fabrication buyers and original equipment manufacturers. It also manufactures and sells thermoformed products for the horticulture industry; and clamshell packing, blister packs, returnable pallets, and handling trays for shipping and storing odd-shaped or difficult-to-handle parts for customers in the medical and life sciences, industrial, recreation, and electronics industries. The company's Plastics segment manufactures polyvinyl chloride pipes for municipal water, rural water, wastewater, storm drainage system, and other uses. This segment markets its products to wholesalers and distributors through independent sales representatives, company salespersons, and customer service representatives. The company was formerly known as Otter Tail Power Company and changed its name to Otter Tail Corporation in 2001. Otter Tail Corporation was founded in 1907 and is headquartered in Fergus Falls, Minnesota.

About Fortis

Fortis Inc. operates as an electric and gas utility company in Canada, the United States, and the Caribbean. It generates, transmits, and distributes electricity to approximately 425,000 retail customers in southeastern Arizona; and 97,000 retail customers in Arizona's Mohave and Santa Cruz counties with an aggregate capacity of 3,377 MW (MW), including 57 MW of solar capacity. The company also sells wholesale electricity to other entities in the western United States; owns gas-fired and hydroelectric generating capacity totaling 64 MW; and distributes natural gas to approximately 1,030,000 customers in British Columbia, Canada. In addition, it owns and operates the electricity distribution system that serves approximately 564,000 customers in southern and central Alberta; owns four hydroelectric generating facilities with a combined capacity of 225 MW; and provides operation, maintenance, and management services to hydroelectric generating facilities. Further, the company distributes electricity in the island portion of Newfoundland and Labrador serving approximately 268,000 customers with an installed generating capacity of 139 MW; and on Prince Edward Island serving approximately 81,000 customers through generating facilities with a combined capacity of 145 MW. Additionally, it provides integrated electric utility service to approximately 176,000 customers in British Columbia; approximately 268,000 customers in Newfoundland and Labrador; approximately 30,000 customers on Grand Cayman, Cayman Islands; and approximately 15,000 customers on certain islands in Turks and Caicos, as well as holds long-term contracted generation assets in British Columbia and Belize, and the Aitken Creek natural gas storage facility. It also owns and operates transmission and distribution lines; and natural gas pipelines. Fortis Inc. was founded in 1885 and is headquartered in St. John's, Canada.

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