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OLDER Analysis Report
Sep 1, 2026
37 days ago · 100% complete
This report is 37 days old — newer filings and price moves since then are not reflected.
For AI assistants & researchers — machine-readable summary of this page

What this page is: Delvantic's full research page for Xylem Inc. (XYL) — AI-driven forensic equity research: mechanical valuation models (DCF, EPV, anchored-PE, scenario) plus three independent AI lenses (Quality / Value / Sentiment). Everything below is rendered server-side; you are not missing content that requires JavaScript. All scores are predictions and research opinions, not financial advice.

Our current read (analysis of 2026-10-08): Designation Low · Gem Score -29 (−100…+100 Quality+Value blend) · Quality 30 · Value -69 · Sentiment -4 (timing only, not weighted) · Composite fair value $58.90 vs $110.11 at analysis

Page map (sections in order; each card carries a stable reference-name attribute you can cite):

  • profile-header / price-overview — company profile, live quote, market cap
  • extended-analysis — the core: three AI lens reads with findings, scores, and the analyst memo
  • future-predictions — our forward price-band predictions
  • market-narrative / ai-findings / gpt-critique — narrative context, cross-model findings, and an adversarial critique of our own analysis (near the end of the document)
  • Members-only sections (render as login gates for anonymous readers): price-history, income-trend, key-metrics, financials (statement tables), insider-trading. The analysis above is public; the raw data tables require a free account.

More for machine readers: site briefing at /llms.txt · any ticker resolves at delvantic.com/stock/TICKER · raw inputs are public-company filings and market data (via licensed data feeds); every model, score, lens read, and prediction on this page is Delvantic's own analysis.

Xylem Inc.

XYL NYSE
Industrials · Specialty Industrial Machinery
Washington, DC 20003, United States xylem.com Updated Sep 1, 4:30am
Price
$110.11
Market Cap
$25.7B
Employees
22,000
Beta
1.01
Avg Volume
1,765,013
Last Dividend
$1.69
CEO
Mr. Matthew Francis Pine

Xylem Inc. is a global water technology company that designs, manufactures, and services engineered solutions for the transport, treatment, testing, and efficient use of water. Its current business spans water infrastructure, applied water, measurement and control solutions, and integrated services that support clean water delivery, wastewater management, stormwater handling, and water reuse. Xylem serves municipalities, utilities, industrial operators, commercial facilities, and residential markets with products such as pumps, valves, filtration and disinfection systems, sensors, analytical instruments, smart metering technologies, and digital monitoring tools. The company also provides service and maintenance capabilities that help customers manage water systems more efficiently across utility, industrial, and building applications. Headquartered in Washington, D.C., and founded in 2011, Xylem Inc. plays a central role in modern water infrastructure by helping customers improve reliability, resource management, and water quality across the full water cycle.

Runs with full report Generated: Sep 1, 2026 4:45am
Price Overview
Price at report time
$110.11
as of Sep 1, 4:30am (37d ago)
Change · Sep 1
-1.20 (-1.08%)
Day Range
$110.00 – $111.29
52-Week Range
$105.29 – $154.27
50-Day MA
$118.01
200-Day MA
$125.01
Volume
2,009,294.00
Right now · live
Log in to get the live feed
Members see the real-time price and the move since this report (over 37d).
Share Structure
Outstanding 233,500,000.00
Float 232,884,416.00
Free Float 99.7%
High free float — 99.7% of shares trade freely, ~0.3% held by insiders/institutions
Very liquid — most shares trade freely. Low insider ownership can mean less management alignment, but makes large position sizing straightforward.
Price History (1 Year)
Last updated: Sep 1, 2026 5:08am (37d ago)
Revenue & Net Income Trend
The directional story — useful even when net income is negative.
Last updated: Sep 1, 2026 4:45am (37d ago)
Revenue
The top line — total sales before any costs or taxes are subtracted. A measure of how much business the company is doing.
Net Income
The bottom line — profit left after subtracting all expenses, interest, and taxes from revenue. Reflects accounting profitability, but includes non-cash items like depreciation, so it isn't the same as cash earned.
Operating Cash Flow
The real cash generated by the day-to-day business — selling products, paying suppliers, collecting from customers. Calculated from net income by adding back non-cash items and adjusting for timing (unpaid bills, unsold inventory). When OCF consistently lags net income, the reported profit may not be converting to real money.
Period Revenue Net Income Net Margin YoY/QoQ
Key Metrics
TD Twelve Data statement HEX SEC filing
Industry comparison last run: Sep 1, 2026 4:41am
P/E · trailing (TTM) (Price per dollar of earnings over the past year — not a run-rate or forward P/E)
HEX
Stock Price / EPS (Diluted)
28.09
Stock Price: $110.11
EPS (Diluted): 3.92
P/B Ratio (Price vs net asset value)
HEX
Stock Price / Book Value Per Share
2.29
Stock Price: $110.11
Total Equity: $11.75B
Shares: 243,994,000
EV/EBITDA (Total value vs operating profit)
HEX
Enterprise Value / EBITDA
15.23
Market Cap: $25.71B
Total Debt: $2.07B
Cash: $1.48B
EBITDA: $1.80B
Enterprise Value (Takeover price (cap + debt - cash))
HEX
Market Cap + Total Debt - Cash
$27.4B
Market Cap: $25.71B
Total Debt: $2.07B
Cash: $1.48B
Gross Margin (Revenue left after direct costs)
HEX
Gross Profit / Revenue
38.5%
Gross Profit: $3.48B
Revenue: $9.04B
Operating Margin (Revenue left after all operations)
HEX
Operating Income / Revenue
13.5%
Operating Income: $1.22B
Revenue: $9.04B
Net Margin (Revenue left as actual profit)
HEX
Net Income / Revenue
10.6%
Net Income: $957.00M
Revenue: $9.04B
ROE (Profit from shareholder equity)
HEX
Net Income / Total Equity
8.1%
Net Income: $957.00M
Total Equity: $11.75B
ROIC (Profit from all invested capital)
HEX
NOPAT / Invested Capital
8.0%
Operating Income: $1.22B
Tax Rate: 19.6%
Equity: $11.75B
Total Debt: $2.07B
Cash: $1.48B
Current Ratio (Can it pay short-term bills)
HEX
Current Assets / Current Liabilities
1.63
Current Assets: $4.64B
Current Liabilities: $2.86B
Debt/Equity (Leverage — debt vs equity)
HEX
Total Debt / Total Equity
0.18
Short-Term Debt: $568.00M
Long-Term Debt: $1.50B
Total Debt: $2.07B
Total Equity: $11.75B
Rev/Share (Top-line per share)
HEX
Revenue / Shares Outstanding
$37.03
Revenue: $9.04B
Shares: 243,994,000
Book Value/Share (Net assets per share)
HEX
(Total Assets - Total Liabilities) / Shares
$48.15
Total Equity: $11.75B
Shares: 243,994,000
FCF/Share (Real cash generated per share)
HEX
(Operating Cash Flow + CapEx) / Shares
$3.73
Operating CF: $1.24B
CapEx: -$331.00M
Shares: 243,994,000
CapEx is negative (outflow) — added to OCF to get FCF
Div Yield (Annual income from holding)
TD
Last Annual Dividend / Stock Price
1.5%
Last Dividend: $1.69
Stock Price: $110.11
Payout Ratio (Earnings paid out as dividends)
HEX
Dividends Paid / Net Income
40.9%
Dividends Paid: -$391.00M
Net Income: $957.00M
Industry Benchmarks
Last run: Sep 1, 2026 4:41am
Compares XYL against LLM-researched typical ranges for its industry. One research call per industry, cached indefinitely — every stock in the same industry reuses the same baseline.
Income Statement (Annual)
Last updated: Sep 1, 2026 4:45am (37d ago)
Metric 2021 2022 2023 2024 2025
Revenue $5.2B $5.5B $7.4B $8.6B $9.0B
Cost of Revenue $3.2B $3.4B $4.6B $5.4B $5.6B
Gross Profit $2.0B $2.1B $2.7B $3.2B $3.5B
Operating Expenses $1.4B $1.5B $2.1B $2.2B $2.3B
Operating Income $585.0M $622.0M $652.0M $1.0B $1.2B
Net Income $427.0M $355.0M $609.0M $890.0M $957.0M
EBITDA $830.0M $858.0M $1.1B $1.6B $1.8B
EPS $2.37 $1.97 $2.81 $3.67 $3.93
EPS (Diluted) $2.35 $1.96 $2.79 $3.65 $3.92
Balance Sheet (Annual)
Last updated: Sep 1, 2026 4:30am (37d ago)
Metric 2021 2022 2023 2024 2025
Cash & Equivalents $1.3B $944.0M $1.0B $1.1B $1.5B
Total Current Assets $3.2B $3.0B $3.9B $4.1B $4.6B
Total Assets $8.3B $8.0B $16.1B $16.5B $17.6B
Current Liabilities $1.4B $1.6B $2.2B $2.3B $2.9B
Long-Term Debt $2.4B $1.9B $2.3B $2.1B $1.5B
Total Liabilities $5.1B $4.4B $5.9B $5.6B $5.9B
Total Equity $3.2B $3.5B $10.2B $10.9B $11.7B
Retained Earnings $2.2B $2.3B $2.6B $3.1B $3.7B
Cash Flow (Annual)
Last updated: Sep 1, 2026 5:08am (37d ago)
Metric 2021 2022 2023 2024 2025
Operating Cash Flow $538.0M $596.0M $837.0M $1.3B $1.2B
Capital Expenditure -$208.0M -$208.0M -$271.0M -$321.0M -$331.0M
Free Cash Flow $330.0M $388.0M $566.0M $942.0M $910.0M
Acquisitions (net) $0 $0 -$476.0M -$193.0M -$163.0M
Net Debt Issued / (Repaid) -$600.0M -$527.0M $118.0M -$16.0M -$82.0M
Dividends Paid -$203.0M -$217.0M -$299.0M -$350.0M -$391.0M
Stock Buybacks -$68.0M -$52.0M -$25.0M -$20.0M -$15.0M
Net Change in Cash -$526.0M -$405.0M $75.0M $102.0M $358.0M
Growth Trends (YoY %)
Last updated: Sep 1, 2026 4:45am (37d ago)
Metric 2022 2023 2024 2025
Revenue Growth +6.3% +33.4% +16.3% +5.5%
Gross Profit Growth +5.5% +30.4% +18.2% +8.2%
Operating Income Growth +6.3% +4.8% +54.8% +21.2%
Net Income Growth -16.9% +71.5% +46.1% +7.5%
EBITDA Growth +3.4% +26.8% +44.4% +14.4%
Dividend History (Last 20)
Last updated: Sep 1, 2026 4:30am (37d ago)
Date Dividend Declaration Record Payment
2026-08-27 $0.43 — — —
2026-05-28 $0.43 — — —
2026-02-24 $0.43 — — —
2025-11-25 $0.40 — — —
2025-08-28 $0.40 — — —
2025-05-29 $0.40 — — —
2025-02-18 $0.40 — — —
2024-11-26 $0.36 — — —
2024-08-29 $0.36 — — —
2024-05-30 $0.36 — — —
2024-02-20 $0.36 — — —
2023-11-20 $0.33 — — —
2023-08-30 $0.33 — — —
2023-05-26 $0.33 — — —
2023-02-21 $0.33 — — —
2022-11-21 $0.30 — — —
2022-08-31 $0.30 — — —
2022-05-25 $0.30 — — —
2022-02-16 $0.30 — — —
2021-11-22 $0.28 — — —
0Company Classification 1Industry Landscape 2Company Momentum 3Forward Projection 4aDCF Valuation 4bEarnings Power Value 4cAnchored PE 4dReverse DCF 4eRevenue-Based DCF 4fAnchored P/S 4gScenario Analysis 4hDividend Discount Model 4iBook Value Analysis 4jInsider Activity 4fCash Flow Quality 4gDebt Maturity Risk 4hMacro Environment 4iSector Intelligence 4jRevenue Confidence 4kSensitivity Analysis 4lSector Demand Cycle 5AI Investigation 5bThesis Evaluation 6Valuation Synthesis
computed not applicable 18 computed · 6 not applicable
Risk : Reward — upside vs downside from this company's own quarters
Computed 2026-10-05 02:01
-0.4 : 1 +1σ upside vs −1σ downside, from this company's own quarterly history
A +1σ run of quarters pays -30%; a −1σ run costs 70%. Ratio -0.4:1 (μ 8.0%, σ 11.6% , 16 pairs).
Older method (repeat-worst-quarter): -0.7 : 1
CaseGrowthMarginFair valuevs price ($110.11)
Bull — recovery +3% 17.3% $62.74 -43%
Base — stabilizes +2% 15.0% $53.44 -51%
Bear — keeps slipping +1% 12.8% $44.69 -59%
Stress — last quarter repeats +3% 11.5% $43.01 -61%
Upside — a +1σ run of quarters (v2) +20% 12.3% $76.91 -30%
Stress — a −1σ run of quarters (v2) -4% 10.9% $33.29 -70%
The next quarters keep the trajectory of the worst recent matched quarter (ending 2026-03-31) — growth stays at 2.7% and margins bend by the same profit-vs-revenue ratio (×1.03). Stress is a trajectory, not a prediction — it answers "what if the ship's current heading simply continues," which history says is the case to respect.
Why this is appearing: this company files quarterly, so its recent trajectory could be measured rather than assumed — the engine matched Jun 2026, Mar 2026 against the same quarters one year earlier and found revenue +2.1% · operating income +18.3% · net income +15.4% year-over-year. That measured heading is what the stress case extends forward. Of those, the stress case extends the worst matched quarter — the one ending Mar 31, 2026 (revenue +2.7%, operating income +5.6% YoY) — not the average. Data measured through Jun 30, 2026 — this card recalculates automatically when the next quarterly filing is ingested. Companies without quarterly filings (many foreign listings) never show this card: with no measured trajectory, there is nothing honest to repeat.
Narrative Economics
The story the market is telling about this stock — the intangible X-factor (founder mythology, cult dynamics, TAM-of-imagination) that moves price beyond what cash flows alone explain. After Shiller, Narrative Economics.
No narrative profile yet for XYL — it's generated by the pipeline (market-narrative step).
Growth Outlook
Analyzed 2026-09-01 05:17

The question every valuation on this page silently assumes: is this company likely to grow? Judged forward — the business, its category, the world — against what's already printed.

Growing Modest low-single-digit revenue expansion paired with genuine, self-help margin expansion (op income +18% on revenue +2%) makes Xylem a compounding earnings story — but the growth rate is decelerating and nowhere near what the price-implied 32.8% demands. conf 6/10
Inline with category Category flat · Industry revenue CAGR ~4.5% and category median recent growth ~5.4% — mature, and the broader specialty industrial machinery cycle is in contraction. Xylem's recent revenue YoY of 5.5% is essentially at category median, while the newest matched-quarter +2.1% sits slightly below it. Xylem is tracking its category on volume, not out-growing it; its differentiation shows up in profit conversion, not share capture.
Next 2 quarters
Growing
Metering and treatment backlog conversion plus continued cost-out should keep EPS rising double-digits even on low-single-digit volume; the segment mix is defensive enough to withstand the contracting sector cycle for two quarters.
≈ inline with expectations
Year 1
Growing
Full-year shape: revenue in the low-to-mid single digits as Applied Water drags and municipal award timing slips, with EBITDA margin expansion carrying earnings up at a double-digit clip. Guidance-consistent.
≈ inline with expectations
Years 2–3
Holding
Structurally the earnings power holds and grinds modestly higher, but the two engines fade: acquisition-built revenue CAGR does not repeat, and the 80/20 plus Evoqua cost runway is finite. Beyond that, earnings growth converges toward a flat ~4-5% category rate. Durable, not compounding fast.
↓ below expectations
The creme: each rung's call measured against what's already printed (vs analyst estimates · vs guidance / FY consensus · vs price-implied growth) — expectations in print are already in the price, so only the variant margin can pay. Hover a rung's chip for the margin read.
Growth drivers
69 Margin-led earnings expansion (80/20, Evoqua synergies) — Operating income +18.3% and net income +15.4% on only +2.1% revenue in the newest matched quarters — that spread is a mix/cost/simplification program, not volume. Evoqua integration cost-out and portfolio pruning still have runway, so earnings can grow double-digits even with mid-single-digit top line. This is the most reliable mechanism in the file.
54 Non-discretionary municipal utility replacement demand — Water Infrastructure and Measurement & Control demand is driven by mandated compliance, leak/non-revenue-water reduction and metering replacement cycles rather than discretionary capex. Utility rate bases fund it, which is why all historical years are positive and revenue volatility is only 5.4% — a defensive shape inside a contracting industrial machinery sector.
38 Smart metering / digital backlog conversion — AMI meter and sensor awards convert to revenue over multi-year deployment schedules, giving visibility that short-cycle machinery peers lack. This underpins the next two prints regardless of macro, and carries better margin than legacy pump volume.
27 Consistent execution vs estimates — Three of the four most recent prints landed at or above EPS estimates (+9%, +4%, in-line), consistent with a management team guiding conservatively while cost programs deliver. Supports the near-term rung.
Growth risks
61 Revenue deceleration is real — Recent revenue YoY 5.5% versus the newest matched-quarter +2.1%, with the quarterly trend explicitly flagged decelerating. The 10.8% multi-year revenue CAGR is largely acquisition-built (Evoqua) and does not repeat organically. Volume growth is fading toward category rate or slightly below.
62 Price-implied growth is unreachable — The reverse-DCF requires 32.8% growth against a business compounding revenue in the low-to-mid single digits with margin gains that mathematically cannot repeat at 18% forever. Margin self-help is finite — once the Evoqua/80-20 runway is harvested, earnings growth converges toward revenue growth.
36 Municipal capex lumpiness plus 4.73% long rates — Utility projects are debt-financed; a 4.73% 10-year with macro headwinds slows bid-to-award timing and pushes large treatment projects right. Budget-constrained municipalities defer, they do not cancel — so this is a timing risk to year_1, not a structural one.
30 Applied Water short-cycle exposure — The commercial/residential building and light-industrial pump business is the cyclical tail and sits inside a sector demand cycle scored -2 (contraction). This segment can subtract a point or two from group growth for several quarters.
Water is the most policy-insulated corner of a contracting industrials complex: replacement of aging pipe, effluent/PFAS compliance and metering mandates are legislated obligations, so the demand floor is high even as machinery capex broadly weakens. The offset is financing — a 4.73% long rate and a flat curve raise the cost of municipal bond issuance, stretching award-to-revenue timelines and making project timing lumpier than the underlying need implies. Tariff and component-cost noise is a margin variable Xylem has so far absorbed through pricing and simplification. Net: the world supports a steady mid-single-digit water demand backdrop with earnings upside from internal cost work — not a step-change growth regime.
Growth position composite +0
ShrinkingStallingHoldingGrowingAccelerating
70Next 2 quarters · Growing
70Year 1 · Growing
50Years 2–3 · Holding
+0Composite (−100…+100)
A research prediction, not advice. Forward-graded: each rung is scored against the prints that follow it. Not an input to the GEM designation — track record first.
Claude Reading
Independent analyst synthesis · claude-opus-4-7 · generated 2026-09-01 05:07:30
Verdict Overvalued but not by 50% — fair value $70-80 on 22-25x normalized FCF; avoid at $110, revisit under $85, don't short.

Independent read on the numbers first: Xylem is compounding revenue at ~10% (2021 $5.2B → 2025 $9.0B, though a chunk of that is the Evoqua deal, not organic), and 2026 quarters ($2.13B Q1, $2.34B Q2) show roughly 3-5% YoY — decelerating hard from the M&A-boosted comps. Net margin has drifted up from ~7% in 2022-23 to ~10.6% TTM, and FCF conversion is genuine ($910M FCF on $957M NI in 2025). Balance sheet is pristine: $2.07B debt vs $1.48B cash and $11.75B equity, D/E 0.18. But ROE is 8.1% and ROIC is 8.0% — that is *not* a compounder's return profile; it's a decent industrial diluted by the Evoqua goodwill on the equity base. At $110 and a 28x trailing P/E on a business earning sub-10% on invested capital growing mid-single-digits organically, you are paying a quality-compounder multiple for a mid-quality industrial.

Where I agree with the prior stack: the synthesis verdict of overvalued and the narrative layer's $56 DCF anchor are directionally right. A business earning ~$1B in FCF, growing FCF maybe 6-8% sustainably, deserves something like 20-22x FCF = ~$20-22B EV, or roughly $75-85/share equity — not $25.7B market cap plus modest net debt. The "platform monopoly / water digitalization" narrative is exactly the kind of story that gets told about pump-and-valve businesses to justify SaaS multiples; the 38.5% gross margin flatly contradicts a software-mix-shift story of any material scale. If digital were really 20%+ of revenue at software economics, gross margin would be north of 45% and climbing visibly. It isn't.

Where I'd push back on the models: the synthesis fair value of $55.68 is too aggressive on the downside. Xylem is not a melting ice cube — regulated water capex (lead pipe replacement, PFAS remediation, IIJA disbursements still ramping) is a real, multi-year tailwind, and the company has pricing power on the installed base. The "sector in contraction" flag looks wrong for water infra specifically; that's a read on broader industrials. Also, the pre-flight thesis assumes 12-13% operating margins as the market's bogey, and Xylem is already at 13.5% operating margin on the annual — so margin expansion isn't purely aspirational, it's partially delivered. A fair value in the $70-80 range (roughly 22-25x normalized FCF, giving credit for the tailwind but not the SaaS fantasy) is more defensible than $56. That still leaves the stock ~30-40% overvalued, not 50%.

Contrarian case worth naming: if PFAS regulation forces a wave of municipal treatment upgrades in 2026-2028, Xylem's Evoqua unit is uniquely positioned and could see step-function revenue, not compound growth. Insider activity is all awards (compensation), not open-market buying — the "net insider buying" tag is misleading; awards are not a signal. The Q2 2026 margin of 11.3% is the best non-seasonal quarter in the dataset, which suggests operational execution is on track even as top-line decelerates. And the debt profile means they can lever up for another Evoqua-scale deal without stress, giving embedded M&A optionality the DCF ignores. None of this gets you to $110, but it gets you closer to $80 than $55, and it means shorting here is dangerous. I dissent partially with the synthesis: agree on direction (overvalued), disagree on magnitude (fair value $70-80, not $55).

GPT Reading
Independent reading · gpt-5.4 · generated 2026-09-01 05:07:46
Verdict Fair business, expensive stock at $110.11 — I see limited upside here and a more reasonable value around $90-95 unless growth re-accelerates and ROIC breaks above 10%.

Xylem looks like a good business priced like a great one. The operating record is clearly better than the crude “mature industrial” label implies: revenue has risen from $5.20B in 2021 to $9.04B in 2025, operating income from $585M to $1.22B, and net income from $427M to $957M. Gross margin improved from 38.1% in 2021 to 38.5% in 2025, while operating margin expanded from 11.3% to 13.5%, so this is not just a revenue aggregation story. The latest four quarters annualize to roughly $9.41B of revenue and $1.02B of net income, which suggests continued progress rather than deterioration. Balance sheet risk is low: $2.07B of debt against $1.48B of cash and $11.75B of equity is modest, and $910M of free cash flow on $957M of net income says earnings quality is real. If I only looked at the business, I’d call it one of the cleaner industrial compounders in large-cap machinery.

But the stock price asks you to pay up as if the next leg of margin and growth is highly visible, and the data here do not fully support that confidence. At $110.11 and a $25.7B market cap, investors are paying about 2.8x 2025 sales, 28x earnings, and 15.2x EV/EBITDA for a company growing revenue 5-6% lately and earnings 7-8% lately. That multiple could be fine for a business with clearly accelerating recurring revenue mix or ROIC well into the teens; instead, ROIC is 8.0% and ROE 8.2%. Those are respectable, not premium. Quarterly progression also says this is still an industrial with seasonality and some lumpiness, not a software-like compounding machine: net margin was 8.2% in 2025 Q1, 9.8% in Q2, 10.0% in Q3, then 14.0% in Q4; 2026 is tracking similarly at 9.1% then 11.3%. That pattern doesn’t disqualify the story, but it does argue against a valuation that assumes smooth, recurring, high-visibility growth.

What stands out most is the gap between business quality and valuation quality. Free cash flow of $910M against a $25.7B equity value is only about a 3.5% FCF yield. Even giving credit for the secular water tailwind, that is thin compensation for a company whose recent growth has already cooled from the multiyear CAGR figures to mid-single digits on revenue. If the latest four-quarter net income base of about $1.02B is the new run rate, the trailing P/E is closer to 25x than the stated 28x, but that still feels full for a 10-11% net margin industrial earning single-digit returns on capital. I don’t buy the harsher machine output implying something like $55-60 fair value; the balance sheet, cash conversion, and margin stability are too good for that. But I also don’t see a persuasive path from these numbers to justify $110 unless revenue can sustainably re-accelerate above 8% while operating margin pushes toward 15% and stays there.

The best pushback to my view is straightforward: the market may be correctly looking through near-term deceleration because Xylem has already proven an ability to scale earnings much faster than revenue. From 2023 to 2025, revenue grew 22.8% while operating income grew 87% and net income 57%, which is exactly the kind of operating leverage that deserves a premium. Recent quarters are not weak: 2026 Q2 revenue of $2.34B was up from $2.30B a year earlier, and net income of $263M was up from $226M, lifting margin from 9.8% to 11.3%. Net debt is negligible, the current ratio is 1.63, and the dividend payout ratio at 41% is conservative enough to support ongoing returns while still funding growth. If management can keep converting a municipal/infrastructure franchise into a higher-service, higher-digital mix, a 25-28x multiple may simply reflect durability rather than exuberance. I weigh that argument less heavily because the hard profitability evidence still tops out at mid-teens operating margin and high-single-digit returns on capital; that is good execution, not yet proof of a structurally superior economics profile.

What would change my mind is not a macro water thesis but a few very specific numbers. I would get more constructive if the next 2-3 quarters showed revenue growth re-accelerating into the high single digits with net margin holding above 11% outside the seasonally strong Q4, or if full-year free cash flow moved clearly above $1.1B without leverage rising. Sustained ROIC above 10% would matter more to me than another narrative about digitalization. Conversely, if revenue slips back toward 3-4% growth or quarterly net margin falls back into the 8-9% range, the current multiple becomes hard to defend and I’d expect the stock to de-rate toward a more normal industrial valuation in the $85-95 range.

Grok Reading
Independent reading · grok-4.5 · generated 2026-09-01 05:08:34
Verdict Overvalued at $110; fundamentals support high-$50s to mid-$70s, narrative premium too large for 5.5% growth and ~8% ROIC

Xylem’s numbers tell a story of a solid industrial that has been financially engineered and narratively re-rated into something it has not yet become. Revenue climbed from $5.20B in 2021 to $9.04B in 2025, with net income more than doubling to $957M and free cash flow reaching $910M on only $331M of capex—genuinely high-quality cash conversion. But the step-function from $5.52B to $7.36B to $8.56B is acquisition-heavy (Evoqua-scale), not pure organic compounding, and the most recent year-over-year revenue growth has slowed to 5.5% with a decelerating quarterly trend. Operating margin sits at 13.5% and net margin at 10.6%; ROIC is 8.0% and ROE 8.2%—respectable for a pump-and-treatment conglomerate, inadequate for a 28.1x trailing P/E, 3.0x sales, and 15.2x EV/EBITDA. At $110.11 and a $25.7B enterprise, the market is paying roughly 28x earnings and a 3.5% FCF yield for mid-single-digit top-line growth and high-single-digit returns on capital. Balance sheet is clean ($2.07B debt against $1.48B cash and $11.75B equity, D/E 0.18), which removes distress risk but does not create growth. Insider activity is almost entirely routine awards, not conviction buying. The quantitative models’ ~$56–60 fair-value anchors are directionally right: fundamentals alone do not support $110.

The market thesis—and the narrative layer’s “platform-monopoly” framing—prices in three things that are only partially visible in the data: mandated multi-decade water infrastructure spend, mix shift toward higher-margin digital/services that pushes operating margins toward 12–13%+ on a sustained basis, and multiple expansion as the story “software-izes.” Trailing gross margin of 38.5% and the path from 2023’s $652M operating income to 2025’s $1.22B show real operating leverage post-integration, and earnings and FCF CAGRs of 25%+ over the last half-decade are hard to dismiss as pure accounting. A smart opponent would also note that municipal and utility capex is sticky, climate-driven water stress is not cyclical in the usual industrial sense, and a 1.5% dividend with a 41% payout leaves room to grow the return of capital without starving reinvestment. That case is coherent—it just requires the company to deliver several more years of 7–8% organic growth plus 100–200 bps of margin expansion that the latest quarters (5.5% revenue growth, still-lumpy sequential margins) have not yet confirmed at scale.

I weigh the skeptic side more heavily because the deceleration is already in the print, ROIC remains industrial not software, and the 97% premium the narrative layer itself assigns over DCF is almost pure belief. Sector headwinds and “in-line with sector” secondary signals do not support a scarcity multiple. The stock is priced for the best version of the water-digitalization story; the financials still read like a well-run specialty machinery consolidator.

What would flip me: two consecutive quarters of organic revenue growth re-accelerating through 8% with operating margin sustained above 14%, or clear disclosure that software/recurring digital is approaching 25%+ of revenue with SaaS-like retention—anything that makes the 28x multiple earn its keep rather than hope for it. A sharp multiple compression toward 18–20x on a growth miss would also reset the setup constructively from a lower base.

Big-3 Panel — where each AI stands
Each AI above independently stated a direction (undervalued, fairly valued, or overvalued) and how strongly it believes it (conviction, 0–5). We combine those into a Bull-Bear Index on a 0–10 scale: 5 is neutral, 10 is maximum bullish (undervalued at full conviction), 0 is maximum bearish. We compute the score ourselves with the same arithmetic for every seat — the models never grade their own bullishness — so the three are directly comparable. Δ shows how far each seat sits from the panel average of 1.7; a large Δ marks the dissenting voice, usually the one worth reading.
Claude claude-opus-4-7 2.0
overvalued · conviction 3/5 · Δ +0.3 vs panel · self: 3.0
GPT gpt-5.4 2.0
overvalued · conviction 3/5 · Δ +0.3 vs panel · self: 4.0
Grok grok-4.5 1.0
overvalued · conviction 4/5 · Δ -0.7 vs panel · self: 3.0
Advanced Analysis Forensic deep-dive · separate lenses
Separate reads — Company Quality (is it a great business?), Valuation (is it mispriced?), and General Sentiment (how macro + narrative are pushing it), kept deliberately apart · 2026-09-01 05:20:00
Delvantic - Cairn AI
Pass at $110 — wait for a dip 7/10
Solid water-infrastructure business priced for perfection at $110 — I'm a watcher, not a buyer, until it prints a 7-handle.
The cruxWhether the market keeps paying a ~2x cash-flow-based-FV premium for the water-capex narrative, or momentum cracks and the multiple compresses toward the $60 composite fair value.
Forensic checks Derived mechanically from XYL's filed financials — not from the AI lenses
Liquidity & RunwaySelf-Funding
DilutionHeavy Dilution
Earnings QualityHigh Earnings Quality
The four lensesswitch a tab for its full read — score + evidence
Company Quality
+30
Solid
edge √Σ 113 · risk √Σ 82 · conf 7/10

Revenue has scaled from $5.20B (2021) to $9.04B (2025), a roughly 75% jump, with gross margin steady at 37-38% and operating margin expanding from 11.3% to 13.5%. Net income nearly doubled from $427M to $957M and FCF ran $910M in 2025 on $942M the prior year - a strong OCF/NI of 1.41x, accruals of -1.9% of assets, Beneish M of -2.51 and Altman Z of 3.78 all say the reported earnings are real and the balance sheet sits in the safe zone. Liquid cash of $1.48B against modest net debt of $588M is a constraint but not a threat given self-funding FCF.

Strengths 4
m70
Clean earnings quality
OCF/NI 1.41x, accruals -1.9% of assets, Beneish -2.51, Altman Z 3.78 - mechanical checks find no manipulation signals and cash conversion exceeds reported net income.
m65
Margin expansion at scale
Operating margin climbed from 11.3% (2021-22) to 13.5% (2025) while revenue nearly doubled, evidence of real operating leverage post-Evoqua integration.
m55
Reliable FCF generation
$910M FCF in 2025 with a 4-year cumulative FCF trajectory of $330M to $942M; funds the business without external capital.
m25
Structural end-market
Water infrastructure implies durable, regulated demand; consistent 37-38% gross margin across a doubling of revenue supports a real, if not wide, moat.
Concerns 3
m75
Heavy share issuance
Diluted share count went from 181.5M (2021) to 244.0M (2025), a 7.7% CAGR - largely Evoqua stock deal - so per-share earnings materially lag headline growth (net income +124% vs EPS growth far lower).
m30
Buyback well below dilution
Buyback/SBC ratio of 75% means SBC alone is not fully offset, and there is no meaningful net repurchase program to counter M and A dilution.
m15
Insider tape neutral-to-soft
One $141K director open-market buy vs a $501K CFO-level sale on option exercise - directionally mixed and too small to signal conviction either way.
This is a genuinely good industrial business - real water-infrastructure demand, expanding margins, cash earnings that back up the P and L, and a balance sheet that is fine even if not fortress-like. What keeps me from calling it Strong is the dilution: growing the share count almost 8% a year, even for a strategic deal like Evoqua, is a real tax on per-share compounding and there is no visible buyback discipline to offset it. Operationally I trust the numbers; as a per-share compounding engine I want to see the share count stabilize and net debt work down before I upgrade the quality read.
Verify before trusting this (6)
  • Organic vs acquired revenue growth 2023-2025 to isolate Evoqua contribution from underlying demand
  • Gross debt maturity ladder and covenants behind the $588M net debt position
  • Goodwill and intangibles as % of assets post-Evoqua and any impairment testing sensitivities
  • Segment-level margins to see whether the 13.5% op margin is broad-based or concentrated
  • Any authorized buyback program and pace of execution to gauge dilution offset going forward
  • Customer/end-market concentration (utility vs industrial vs residential) and backlog trend
Valuation / Mispricing
-69
Rich
edge √Σ 20 · risk √Σ 106 · conf 6/10
Price $110 vs deserved ~$55-60 composite (DCF $44, EPV $31, anchored-PE $120) - roughly 45% above fair, no margin of safety. attractive below $72.00

Price is $110.11 against an e2e composite fair value of $60 and a signal-adjusted FV of $55.68 - roughly a 45-50% premium to deserved value. The DCF ($44) and EPV floor ($31) both sit well below price; only the anchored-PE method ($120) supports today's quote, and that method is essentially capitalizing the current multiple rather than testing whether the multiple is deserved. Stripping that outlier, the cash-flow-based work says the business is worth $40-60 per share. Company quality is Solid but not Strong - ~8%/yr share issuance from Evoqua-style deals is a real drag on per-share compounding, which argues for a lower deserved multiple, not a higher one. To justify $110 the market must underwrite sustained mid-to-high single-digit organic growth plus continued margin expansion plus disciplined M&A - a stack of 'and's rather than 'or's. That is the definition of priced for perfection on a slow-cycle municipal capex business.

Cheap signals 1
m20
Quality supports some premium
Solid quality (score 30), real water-demand tailwind, expanding margins and clean cash conversion justify trading above EPV floor - but not 3x it.
Rich / priced-in 4
m70
Price ~2x cash-flow-based FV
DCF $44 and EPV floor $31 imply the operating business is worth $30-45; at $110 the market is paying ~2.5-3.5x the cash-earnings-anchored value.
m55
Composite FV $60 vs $110 price
Signal-adjusted FV of $55.68 puts implied downside near 49%. Even weighting generously toward the anchored-PE method, deserved value struggles to clear $80.
m45
Dilution is not in the bull math
~8%/yr share issuance meaningfully taxes per-share FCF growth; the market appears to be extrapolating aggregate revenue and margin gains without discounting for that leakage.
m35
Anchored-PE is the only supportive method - and it's circular
The $120 anchored-PE simply reflects today's multiple on today's earnings; it does not test whether that multiple is warranted, so it should not carry equal weight with DCF/EPV.
I don't see a mispricing to the upside here - I see a good business at a full price. The cash-flow methods say $30-45, the composite says $60, and I'm being asked to pay $110. That is not a margin of safety; that is paying for a decade of flawless execution plus a water-crisis narrative premium. I'd want it in the low-$70s before the risk/reward turns interesting, and closer to $55-60 to get genuinely excited. Until then it's a fine business I'm happy to watch from the sidelines.
Verify before trusting this (5)
  • Organic (ex-Evoqua) revenue growth and whether it is sustaining mid-single-digits or fading toward low-single-digits
  • Segment margin trajectory - is Measurement and Control Solutions actually inflecting or normalizing
  • Guided share count and any buyback authorization to offset dilution
  • Municipal order book and backlog conversion cadence - lumpy or accelerating
  • Free cash flow conversion vs GAAP EPS over the next 2-4 quarters
General Sentiment
-4
Balanced
tail √Σ 72 · head √Σ 76 · conf 5/10

The macro tape is mildly supportive: risk-on at +26, VIX under 15, and beta near 1.0 means XYL neither gets amplified lift nor macro punishment. Higher rates (10y 4.73%) and a 25.8 market PE are a background headwind for a name trading around 24x forward on a story-premium multiple, but nothing acute is pressing on the shares this week. The news flow (Europe pump market growth forecast) is benign and quietly reinforces the picks-and-shovels water thesis without being a real catalyst. The narrative doing the heavy lifting is a platform-monopoly water-infrastructure story with strong intensity but only moderate durability and low cult - meaning the belief is real but not fanatical, so it depends on continued validation from municipal capex headlines, margin execution, and ESG fund flows. Momentum has decelerated (recent 5.5% vs 10.8% long-term), which is the first hint the story is losing marginal buyers even as the tape stays friendly. Net: sentiment is roughly balanced - the tape and story lean tailwind, but a maturing narrative on a premium multiple caps upside pressure.

Tailwinds 3
m40
Risk-on tape, average beta
VIX under 15 and a mildly risk-on regime is a gentle lift for a beta-1.0 industrial. Not decisive, but removes the discount that a stress tape would apply.
m55
Water-infrastructure narrative still intact
Strong-intensity platform-monopoly story around aging water systems, climate stress and smart-water digitalization keeps ESG and thematic funds anchored as holders, defending the premium multiple.
m25
Benign sector news flow
Europe pump market forecast to grow 4.3% CAGR to 2031 with XYL cited as a key player - low-signal but quietly reinforces the secular-growth framing.
Headwinds 3
m55
Narrative stretched vs anchor
Price at $110 vs a $56 DCF anchor means sentiment is doing most of the work. Any crack in the water-capex or margin-expansion story hits a name with only moderate narrative durability.
m40
Momentum decelerating
Recent 5.5% trailing the 10.8% long-term CAGR suggests marginal buyers are thinning even in a supportive tape - an early tell the story is maturing.
m35
Rates and market PE crosswind
10y at 4.73% and market PE 25.8 is a persistent drag on any 24x-forward premium-multiple industrial, though not acute enough to force de-rating this week.
Net pressure is close to neutral with a slight tailwind bias. The tape is friendly, the water story still has believers, and news flow is quietly supportive - but the narrative is doing all the heavy lifting against a rich multiple, and decelerating momentum is the first hairline crack. This is a name where sentiment is not currently pushing hard in either direction; the risk is asymmetric to the downside if the story wobbles, but nothing on the immediate tape says it will.
Verify before trusting this (4)
  • Municipal water capex data points and any US federal infrastructure funding updates
  • Analyst target revisions and consensus split - watch for downgrades citing valuation
  • Q3 print: margin trajectory on service/software mix, the linchpin of the premium multiple
  • Whether ESG/thematic fund flows into water names hold up if rates stay elevated
The market-wide tape + this name's exposure to it (beta / sector / narrative durability). Context on the non-fundamental pressure — not a call on the business or the price. processId: detail-general-sentiment
Growth Outlook
+0
Growing
edge √Σ 99 · risk √Σ 99 · conf 6/10

Water is the most policy-insulated corner of a contracting industrials complex: replacement of aging pipe, effluent/PFAS compliance and metering mandates are legislated obligations, so the demand floor is high even as machinery capex broadly weakens. The offset is financing — a 4.73% long rate and a flat curve raise the cost of municipal bond issuance, stretching award-to-revenue timelines and making project timing lumpier than the underlying need implies. Tariff and component-cost noise is a margin variable Xylem has so far absorbed through pricing and simplification. Net: the world supports a steady mid-single-digit water demand backdrop with earnings upside from internal cost work — not a step-change growth regime.

Growth drivers 4
m69
Margin-led earnings expansion (80/20, Evoqua synergies)
Operating income +18.3% and net income +15.4% on only +2.1% revenue in the newest matched quarters — that spread is a mix/cost/simplification program, not volume. Evoqua integration cost-out and portfolio pruning still have runway, so earnings can grow double-digits even with mid-single-digit top line. This is the most reliable mechanism in the file.
m54
Non-discretionary municipal utility replacement demand
Water Infrastructure and Measurement & Control demand is driven by mandated compliance, leak/non-revenue-water reduction and metering replacement cycles rather than discretionary capex. Utility rate bases fund it, which is why all historical years are positive and revenue volatility is only 5.4% — a defensive shape inside a contracting industrial machinery sector.
m38
Smart metering / digital backlog conversion
AMI meter and sensor awards convert to revenue over multi-year deployment schedules, giving visibility that short-cycle machinery peers lack. This underpins the next two prints regardless of macro, and carries better margin than legacy pump volume.
m27
Consistent execution vs estimates
Three of the four most recent prints landed at or above EPS estimates (+9%, +4%, in-line), consistent with a management team guiding conservatively while cost programs deliver. Supports the near-term rung.
Growth risks 4
m61
Revenue deceleration is real
Recent revenue YoY 5.5% versus the newest matched-quarter +2.1%, with the quarterly trend explicitly flagged decelerating. The 10.8% multi-year revenue CAGR is largely acquisition-built (Evoqua) and does not repeat organically. Volume growth is fading toward category rate or slightly below.
m62
Price-implied growth is unreachable
The reverse-DCF requires 32.8% growth against a business compounding revenue in the low-to-mid single digits with margin gains that mathematically cannot repeat at 18% forever. Margin self-help is finite — once the Evoqua/80-20 runway is harvested, earnings growth converges toward revenue growth.
m36
Municipal capex lumpiness plus 4.73% long rates
Utility projects are debt-financed; a 4.73% 10-year with macro headwinds slows bid-to-award timing and pushes large treatment projects right. Budget-constrained municipalities defer, they do not cancel — so this is a timing risk to year_1, not a structural one.
m30
Applied Water short-cycle exposure
The commercial/residential building and light-industrial pump business is the cyclical tail and sits inside a sector demand cycle scored -2 (contraction). This segment can subtract a point or two from group growth for several quarters.
vs expectations: ~6m inline · 1y inline · 2-3y below
The forward growth verdict — is the business itself likely to grow (next 2 quarters / year 1 / years 2–3), judged against its category and against printed expectations. The full horizon ladder + creme renders on the Growth Outlook card above. Not a call on the price (Valuation owns that) or the tape (Sentiment owns that).
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Lenses kept deliberately separate — Company Quality (price-agnostic), Valuation (price-conditional), General Sentiment (non-fundamental macro/narrative pressure), and Growth Outlook (the forward growth verdict). The scores are not blended. Filing-level items (convertibles, lock-ups, customer concentration) are v2 — see each lens's "verify."
Price Prediction
Lower -10.0% v0.6.0 View full prediction →

When we made this prediction on Sep 1, 2026, XYL was $107.20. We expect it to be $96.50 by Mar 2027, and we consider it great value under $72.00. This is an early model (v0.6.0) — the direction is more reliable than the exact price. Made Sep 1, 2026.

Price when predicted$107.20
Our estimate for Mar 2027$96.50-10.0%
Great value below$72.00
Price history shown (6 Months)

Blue is our prediction, starting the day we made it. Grey is a slower route to the same place — the same destination, taking longer. Black is the actual price, so you can see how we are doing.

Post-Report Due Diligence NOTES
The report is written. This is what its valuation stands on.
Analyzed Oct 5, 2026 · 02:01 3d ago
Read epv-floor ext-gem-composite anchored-pe · FY income statement, balance sheet
1 finding · $0, re-derived on each view

Evidence for a closer look, not a verdict — no score or designation on this page has been changed by it. Items marked material are ones where a conclusion above moves to the other side of the price.

anchored-pe — the "fair value below price" reading turns on 2 inputs NOTE found by sensitivity, not by rule
Published $98.65 vs price $110.11. Nudging `trailing_eps` (up 25%), `adjusted_pe` (up 25%) moves the fair value to the other side of the price. This does not say those inputs are wrong — it says they are where to look first.
trailing_eps flips up 25% adjusted_pe flips up 25%
Price at analysis $110.11. This is where an investigation should start — it is not where one ends. Nothing here was checked against the filings, the tape, or the news; that is the investigator's job.
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My Notes personal — only you see this
v1.1.760 · f4b58a28 · 2026-10-07 20:07:48