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Are Investors Undervaluing Otter Tail (OTTR) Right Now?

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One company to watch right now is Otter Tail (OTTR). OTTR is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 11.81, which compares to its industry's average of 14.82. OTTR's Forward P/E has been as high as 19.85 and as low as 11.81, with a median of 16.66, all within the past year.

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Investors should also recognize that OTTR has a P/B ratio of 2.08. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. OTTR's current P/B looks attractive when compared to its industry's average P/B of 2.25. Within the past 52 weeks, OTTR's P/B has been as high as 3.08 and as low as 2.08, with a median of 2.60.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. OTTR has a P/S ratio of 1.56. This compares to its industry's average P/S of 1.91.

Finally, investors should note that OTTR has a P/CF ratio of 6.57. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 12.20. Within the past 12 months, OTTR's P/CF has been as high as 12.72 and as low as 6.57, with a median of 9.

If you're looking for another solid Utility - Electric Power value stock, take a look at TransAlta (TAC). TAC is a # 2 (Buy) stock with a Value score of A.

Additionally, TransAlta has a P/B ratio of 1.93 while its industry's price-to-book ratio sits at 2.25. For TAC, this valuation metric has been as high as 2.65, as low as 1.76, with a median of 2.17 over the past year.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Otter Tail and TransAlta are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, OTTR and TAC feels like a great value stock at the moment.


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Otter Tail Corporation (OTTR) : Free Stock Analysis Report
 
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Zacks Investment Research