Head to Head Review: Otter Tail (NASDAQ:OTTR) vs. Terna (OTCMKTS:TERRF)

Terna (OTCMKTS:TERRF) and Otter Tail (NASDAQ:OTTR) are both utilities companies, but which is the better stock? We will contrast the two companies based on the strength of their valuation, analyst recommendations, profitability, dividends, institutional ownership, risk and earnings.

Analyst Ratings

This is a summary of current ratings and recommmendations for Terna and Otter Tail, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Terna	0	1	0	0	2.00
Otter Tail	1	4	0	0	1.80

Otter Tail has a consensus target price of $86.00, suggesting a potential downside of 5.35%. Given Otter Tail’s higher probable upside, analysts plainly believe Otter Tail is more favorable than Terna.

Valuation & Earnings

This table compares Terna and Otter Tail”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Terna	N/A	N/A	N/A	$0.26	42.26
Otter Tail	$1.32 billion	2.90	$275.89 million	$4.64	19.58

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Terna	N/A	N/A	N/A
Otter Tail	14.83%	14.56%	6.70%

Institutional and Insider Ownership

20.2% of Terna shares are owned by institutional investors. Comparatively, 61.3% of Otter Tail shares are owned by institutional investors. 2.0% of Otter Tail shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Dividends

Terna pays an annual dividend of $0.16 per share and has a dividend yield of 1.5%. Otter Tail pays an annual dividend of $2.31 per share and has a dividend yield of 2.5%. Terna pays out 61.8% of its earnings in the form of a dividend. Otter Tail pays out 49.8% 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 increased its dividend for 12 consecutive years. Otter Tail is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Otter Tail beats Terna on 11 of the 13 factors compared between the two stocks.

About Terna

Terna S.p.A., together with its subsidiaries, provides electricity transmission and dispatching services in Italy, other Euro-area countries, and internationally. It operates through Regulated, Non-Regulated, and International segments. The company is involved in the design, construction, management, development, operation, and maintenance of national transmission grid; dispatching and metering; and construction of storage systems. It also supplies transformers and cables; provides energy and connectivity services; and installs and operates interconnecting lines. In addition, the company designs, produces, commercializes, and repairs power transformers for electricity transmission and distribution grids; industrial transformers for the steel and metals industries; special transformers for convertors used in electrochemical production; produces and sells marine and terrestrial cables; develops renewable energy projects; and undertakes private interconnector projects. Terna S.p.A. was founded in 1962 and is based in Rome, Italy.

About Otter Tail

Otter Tail Corporation, together with its subsidiaries, engages in electric utility, manufacturing, and plastic pipe businesses in the United States. It operates through three segments: Electric, Manufacturing, and Plastics. The 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 markets. This segment generates electricity through coal, fuel oil, solar, wind, and natural gas. It serves approximately residential, commercial, and industrial customers. The Manufacturing segment engages in the contract machining, metal parts stamping, fabrication and painting, production of plastic thermoformed horticultural containers, life science and industrial packaging, and material handling components and extruded raw material stock for the recreational vehicle, lawn and garden, agricultural, construction, and industrial and energy equipment end markets. The Plastics segment manufactures polyvinyl chloride pipes for municipal water, rural water, wastewater, storm drainage and water reclamation system, and other uses for customers in the horticulture, medical and life sciences, industrial, recreation, and electronics industries. 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.