OTIS

We rate Otis Worldwide Corp (OTIS) as a Hold with a composite score of 57.1/100 at a current price of $89.91. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (94th percentile) and value (69th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (40th percentile) and momentum (43th percentile) tempers our overall conviction. We assign a Narrow Moat rating (48/100), Low uncertainty, and Poor capital allocation.

Key items to watch: quarterly earnings execution and sector-level competitive dynamics. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Otis Worldwide Corp holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 57.1/100 places it at rank #1014 in our full 7,333-stock universe. With a $35.9B market capitalization, Otis Worldwide Corp operates at meaningful scale within the Manufacturing sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue is growing at 2%, though momentum at the 43th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 31% (-11.5pp vs sector) narrow to operating margins of 13% (+12.1pp vs sector) and net margins of 11.4%, yielding a gross-to-net conversion rate of 37%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $89.91, Otis Worldwide Corp is trading near fair value based on current fundamentals. Our value factor score of 69/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 22.1x (roughly in line with the sector median of 22.3x), EV/EBITDA of 22.9x (at a premium), P/S of 2.5x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Low uncertainty rating to Otis Worldwide Corp. The company exhibits strong financial stability with a beta of 0.38, and a stability factor in the 94th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.38 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 94th percentile and quality factor at the 56th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (94th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Otis Worldwide Corp's capital allocation as Poor. Key concerns include low returns on equity (-33.0%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Otis Worldwide Corp significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Otis Worldwide Corp receives a Hold rating with a composite score of 57.1/100 (rank #1014 of 7,333). Our quantitative framework assigns a Narrow Moat (48/100, trend: stable), Low uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 60/100.

Our analysis supports a neutral stance on Otis Worldwide Corp. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.