Now trading at a price of $119.4, Xylem has moved 4.7% so far today.
Xylem returned gains of 5.9% last year, with its stock price reaching a high of $119.94 and a low of $87.59. Over the same period, the stock underperformed the S&P 500 index by -12.8%. The company's 50-day average price was $110.38. Xylem Inc., together with its subsidiaries, engages in the design, manufacture, and servicing of engineered products and solutions for the water and wastewater applications in the United States, Europe, the Asia Pacific, and internationally. Based in Washington, DC, the large-cap Industrials company has 17,800 full time employees. Xylem has offered a 1.1% dividend yield over the last 12 months.
Strong Revenue Growth With a Flat Capital Expenditure Trend:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $5,207 | $5,249 | $4,876 | $5,195 | $5,522 | $6,752 |
| Revenue Growth | n/a | 0.81% | -7.11% | 6.54% | 6.29% | 22.27% |
| Gross Margins | 39% | 39% | 38% | 38% | 38% | 38% |
| Operating Margins | 13% | 9% | 8% | 11% | 11% | 9% |
| Net Margins | 11% | 8% | 5% | 8% | 6% | 7% |
| Net Income (MM) | $549 | $401 | $254 | $427 | $355 | $492 |
| Net Interest Expense (MM) | $82 | $67 | $77 | $76 | $50 | $48 |
| Depreciation & Amort. (MM) | $117 | $140 | $117 | $118 | $111 | $160 |
| Earnings Per Share | $3.03 | $2.21 | $1.4 | $2.35 | $1.96 | $2.44 |
| EPS Growth | n/a | -27.06% | -36.65% | 67.86% | -16.6% | 24.49% |
| Diluted Shares (MM) | 181 | 181 | 181 | 182 | 181 | 242 |
| Free Cash Flow (MM) | $349 | $613 | $641 | $330 | $388 | $507 |
| Capital Expenditures (MM) | $237 | $226 | $183 | $208 | $208 | $237 |
| Current Ratio | 1.51 | 1.63 | 1.8 | 2.27 | 1.89 | 1.72 |
| Total Debt (MM) | $2,308 | $2,316 | $3,084 | $2,440 | $1,880 | $17 |
| Net Debt / EBITDA | 2.61 | 2.54 | 2.5 | 1.55 | 1.28 | -0.86 |
Xylem benefits from rapidly growing revenues and a flat capital expenditure trend, wider gross margins than its peer group, and generally positive cash flows. The company's financial statements show a decent current ratio of 1.72 and healthy leverage levels. However, the firm has declining EPS growth. Finally, we note that Xylem has decent operating margins with a stable trend.
Trades Below Its Graham Number but Has an Elevated P/E Ratio:
Xylem has a trailing twelve month P/E ratio of 45.1, compared to an average of 22.19 for the Industrials sector. Based on its EPS guidance of $4.07, the company has a forward P/E ratio of 27.1. The 4.3% compound average growth rate of Xylem's historical and projected earnings per share yields a PEG ratio of 10.46. This suggests that these shares are overvalued. In contrast, the market is likely undervaluing Xylem in terms of its equity because its P/B ratio is 2.9 while the sector average is 4.06. The company's shares are currently trading -60.3% below their Graham number. In conclusion, Xylem's impressive cash flow trend, decent P/B ratio, and reasonable use of leverage demonstrate that the company may still be fairly valued — despite its elevated earnings multiple.
Analysts Give Xylem an Average Rating of Buy:
The 13 analysts following Xylem have set target prices ranging from $100.0 to $140.0 per share, for an average of $124.23 with a buy rating. The company is trading -3.9% away from its average target price, indicating that there is an analyst consensus of some upside potential.
Xylem has an average amount of shares sold short because 2.2% of the company's shares are sold short. Institutions own 94.3% of the company's shares, and the insider ownership rate stands at 0.3%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 12% stake in the company is worth $3,326,676,924.
