Otis Worldwide Corporation (OTIS): A Bull Case Theory

Published on September 5, 2025 at 11:28 am by Ricardo Pillai in News, Stock Analysis

We came across a bullish thesis on Otis Worldwide Corporation on Brass Tacks Cap’s Substack. In this article, we will summarize the bulls’ thesis on OTIS. Otis Worldwide Corporation’s share was trading at $86.38 as of August 29^th. OTIS’s trailing and forward P/E were 22.85 and 21.32 respectively according to Yahoo Finance.

Otis Worldwide Corporation (OTIS), founded in 1853 by Elisha Otis, is the global leader in elevators and escalators, with operations across more than 200 countries. Spun off from United Technologies in 2020, the company now benefits from a singular focus on its core business, leveraging its brand strength, scale, and long-standing reputation for safety and reliability. Otis operates through two main segments: New Equipment, which contributes 43% of sales but only 22% of operating profit, and Service, which generates 57% of sales and 78% of profit.

The service business, underpinned by a 2.2 million-unit installed base and a retention rate above 94%, provides recurring high-margin revenue, making it the crown jewel of Otis’ model. The company’s ability to convert installations into service contracts—up to 90% in developed markets—creates a steady pipeline of long-term earnings. Competitive advantages including scale, high switching costs, brand equity, regulatory expertise, and technological leadership through IoT platforms like Otis ONE™ establish a wide economic moat.

Growth drivers such as urbanization, modernization of aging infrastructure, expansion in emerging markets, and digital upgrades position Otis for long-term compounding. Financially, the company generates robust free cash flow, with high ROIC and disciplined capital allocation balancing reinvestment, dividends, and buybacks. Despite trading at about 26x free cash flow, Otis’ resilient service base and durable moat mitigate downside risk. With strong management execution and exposure to secular trends in urbanization and vertical growth, Otis offers investors a quality, long-duration compounder capable of delivering consistent value creation over the coming decade.

Previously we covered a bullish thesis on Otis Worldwide Corporation (OTIS) by Brass Tacks Cap in October 2024, which highlighted the company’s strong service segment, high retention rates, and durable moat. The company’s stock price has depreciated approximately 16% since our coverage. This is because the thesis did not play out near term. The thesis still stands as Otis’ service-driven model supports long-term compounding. Brass Tacks Cap shares an identical view but emphasizes valuation support.