OTIS Otis Worldwide
Service annuity moat on the world's elevator fleet—stable, fairly priced, not cheap.
The story
Otis is the world's largest elevator company, earning a recurring annuity on its massive installed service base—the true moat. New equipment is cyclical but seeds future service revenue. The franchise is mature, growing modestly with global urbanization and pricing, while service mix gradually lifts margins.
No material change since prior take: revenue growth of 4% is consistent with the 3-4% recent trajectory driven by service annuity growth and modest new-equipment volume. Margin expansion to 17.5% over 7 years reflects the gradual service-mix shift toward higher-margin recurring revenue. Sales-to-capital of 5.5 stays slightly below the 5.82 actual, and beta of 0.9 reflects the defensive service-heavy cash flows below the 1.05 industrial anchor.
Value drivers
| Revenue growth (Y1) | 4.0% |
| Terminal growth | 2.5% |
| Forecast horizon | 8y |
| Target operating margin | 17.5% |
| Years to target margin | 7 |
| Sales-to-capital | 5.50 |
| Beta | 0.90 |
| Failure probability | 1.0% |
| Cost of capital (WACC) | 8.0% |
| Terminal WACC | 8.3% |
Valuation bridge
| PV of explicit FCFF | 12.00B |
| PV of terminal value | 19.97B |
| Equity value | 24.61B |
| ÷ shares → per share | $64.65 |
News
neutral +0.10 · 8 articles
- Why Is Otis Worldwide (OTIS) Up 1.4% Since Last Earnings Report?
- Otis Worldwide Stock: Analyst Estimates & Ratings
- Generac Tops Q2 Earnings Estimates, Reaffirms 2026 Revenue Outlook
- 1 Mid-Cap Stock for Long-Term Investors and 2 We Find Risky
- Otis Service Growth Builds Momentum as Equipment Demand Stays Weak
- Is Otis Stock Attractive After Guidance Cuts and Its 19% YTD Slide?
- Otis Worldwide (OTIS) Beat In Q2, Is The 25% Undervaluation Case Still Compelling?
- Otis Worldwide Corporation Q2 2026 Earnings Call Summary
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 15.51B | 4.0% | 16.2% | 1.88B | 108.44M | 1.78B | 1.64B |
| 2 | 16.09B | 3.8% | 16.4% | 1.98B | 106.74M | 1.88B | 1.61B |
| 3 | 16.67B | 3.6% | 16.6% | 2.08B | 104.51M | 1.98B | 1.57B |
| 4 | 17.23B | 3.4% | 16.8% | 2.18B | 101.75M | 2.08B | 1.53B |
| 5 | 17.77B | 3.1% | 17.1% | 2.28B | 98.45M | 2.18B | 1.49B |
| 6 | 18.29B | 2.9% | 17.3% | 2.38B | 94.62M | 2.28B | 1.44B |
| 7 | 18.79B | 2.7% | 17.5% | 2.47B | 90.27M | 2.38B | 1.39B |
| 8 | 19.26B | 2.5% | 17.5% | 2.54B | 85.40M | 2.45B | 1.33B |
Key risks
- New-equipment cyclicality could drag consolidated revenue and margins during construction downturns
- Net debt of $6.86B creates financial leverage risk if rates stay elevated
- Competitive pricing pressure from Kone, Schindler, and ThyssenKrupp in both segments
Catalysts
- Accelerated service contract conversion on emerging-market installed base
- Margin expansion from digital/connected-elevator services improving service productivity