Urbanization and high-density construction have made elevators and escalators essential to modern buildings and daily mobility. Otis Worldwide (OTIS) supports this infrastructure through a service-driven model that generates stable, high-margin recurring revenue. In today’s FA Alpha Daily, we analyze its service on existing systems that offers more durable value than investors expect.
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Elevators and escalators have become crucial to modern society, and are found almost everywhere today as buildings continue to become larger and taller.
Otis Worldwide Company (OTIS) specializes in the development and manufacturing of elevators, escalators, and moving walkways. Otis has been in operation since 1852 when Elisha Otis invented the first passenger elevator. Today, the company continues to build on its reputation and remains the world’s largest manufacturer of elevators.
Today’s systems are far more advanced than the ones first used nearly two centuries ago, with bluetooth technology, smart sensors, and other technology that make them safer and more efficient.
Otis maintains over 2.5 million customer units globally that serve more than 2.5 billion people each day.
Although Otis generates around $5 billion per year from selling new equipment, the majority of its revenue comes from servicing existing systems. These servicing contracts generated $9.4 billion in revenue in 2025.
In addition to being the largest part of Otis’ business, services are also faster growing and more profitable than traditional equipment sales.
Equipment sales have declined 7% since 2020, while generating 6% operating margins in that time. Meanwhile, service revenues have grown 28%, while posting 24% margins.
Thanks to this dynamic, Otis’ Uniform return on assets (“ROA”) has consistently topped 30%+ levels since 2020.
In 2024, the company delivered a Uniform ROA of 38% alongside a Uniform asset growth of 25%.
Despite this performance, and leadership position in its market, Otis’ stock currently trades at a Uniform P/E of 27x. At these levels, the market understands the company’s importance however investors may be overly cautious regarding Otis’ exposure to cyclical construction trends.
Still, the company’s ability to generate consistent revenue following a system’s installation positions this company as an interesting opportunity for investors who desire exposure to continued infrastructure build-out in the U.S.
Best regards,
Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research
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