Xylem Inc. (XYL) stock analysis

P/E below its 5-year median

Xylem's P/E of 21.0 is below its own 5-year median of 38.7.

P/E below the industry

Xylem's P/E of 21.0 is below the General Industrial Machinery and Equipment median of 26.9.

EV/EBITDA below its 5-year median

Xylem's EV/EBITDA of 17.5 is below its 5-year median of 23.5.

P/B below the industry

Xylem's price-to-book of 2.12 is below the General Industrial Machinery and Equipment median of 2.84.

Trading below fair value

The share price of $95.11 is below our fair value estimate of $133.09.

Margin of safety over 20%

The price is 28.5% below fair value, more than the 20% cushion we look for.

Revenue growing 10%+ a year

Revenue grew 17.8% a year over the last three fiscal years.

EPS growing 10%+ a year

Diluted EPS grew 26.0% a year over the last three fiscal years.

Earnings growth not accelerating

Net income grew 14.1% over the last twelve months, against a 5-year average of 30.4% a year.

Growing slower than the industry

Revenue grew 1.9% over the last twelve months; the General Industrial Machinery and Equipment median is 12.4%.

Guidance raised

Xylem raised its full-year 2026 revenue outlook on Jul 28, 2026.

Gross margin improving

Gross margin was 39.8% over the last twelve months, against 38.2% a year earlier.

Return on equity under 15%

Return on equity was 10.1% over the last twelve months and averaged 10.1% over five years; we look for 15% on both.

Return on capital under 10%

Return on invested capital was 9.0%, below the 10% that usually covers the cost of capital.

Return on equity above the industry

Xylem's return on equity of 10.1% is above the General Industrial Machinery and Equipment median of 9.9%.

Earnings grew over 5 years

Net income grew 30.4% a year on average over the last five fiscal years.

Net margin above its 5-year average

Net margin was 11.9% over the last twelve months, against a 5-year average of 8.8%.

Net margin above the industry

Xylem's net margin of 11.9% is above the General Industrial Machinery and Equipment median of 8.0%.

Low debt

Debt is 28.2% of shareholders' equity, under the 40% we consider low.

Debt falling against equity

Debt to equity fell from 104% five years ago to 28.2%.

Debt covered by cash flow

Operating cash flow over the last twelve months equals 43.9% of total debt.

Interest well covered

Operating income covers interest expense 36.1 times.

Short-term assets cover short-term debts

Current assets are 1.39 times current liabilities.

Low bankruptcy risk

The Altman Z-score is 3.12; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Xylem paid dividends worth 1.8% of the share price over the last twelve months.

Yield below Treasuries

The 1.8% yield is below the 4.4% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.8% or more; Xylem yields 1.8%.

Dividend not cut

The dividend per share has not fallen by more than 10% in any of the last 10 fiscal years.

Covered by earnings

Dividends take 37.4% of net income.

Covered by free cash flow

Dividends take 44.0% of free cash flow.