Xylem Inc. (XYL): what the price assumes

In the published model solve dated 2026-Q2, anchored at $111.31, Xylem Inc. (XYL) is priced for +15.8% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-28.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/XYL

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 8: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.8% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

Every valuation family lands below the price. The price therefore sits beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.1%); the inversion above states its own rate.

Per-Model Detail (n=15)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• Xylem sells the pumps, treatment systems, smart meters, and services that move and clean water, and the demand sits on a long secular tailwind: scarcity, aging infrastructure, and regulation, with the company reaching municipal customers through channel partners and offering "filtration and separation, disinfection, and wastewater solutions" across its segments.
• The defining risk is the price, not the business: at roughly 26 times operating income the market embeds about 24.9% annual operating-profit growth for five years, a pace only about 30% of comparable fast-growers have sustained even half that long.
• What moves the stock next is margin progress: full-year 2025 revenue hit a record $9.0 billion, and 2026 guidance calls for organic growth of 2% to 4% with adjusted EBITDA margins expanding 70 to 110 basis points.

Bull Case

Water is the rare industrial end market where demand is not really cyclical in the way bridges or factories are; it is structural. People need clean water and functioning wastewater systems in every economy, and the infrastructure that delivers it is aging in the developed world and being built out in the emerging one. Xylem sits across that whole chain, and the 10-K describes a portfolio spanning "filtration and separation, disinfection, and wastewater solutions, for municipal and industrial applications," reaching infrastructure customers indirectly through channel partners. That breadth, transport, treatment, applied water, smart metering, and services, is the sector lens that matters: Xylem is less a single-product manufacturer than a diversified bet on the water cycle, which smooths the demand and gives it many places to grow.

The execution has been turning the secular story into financial results. Full-year 2025 revenue reached a record $9.0 billion, up 6% reported and 5% organically, and the company guided 2026 toward $9.1 to $9.2 billion with adjusted EBITDA margins expanding 70 to 110 basis points. The margin expansion is the part the bull case leans on, because it comes from productivity and price realization rather than just volume. The 10-K points to building solutions growing on "strong price realization and higher demand in the U.S." even as some emerging markets softened, which is the signature of pricing power: the company can lift price into a mixed demand environment and still grow.

The portfolio is also getting sharper. Xylem has been integrating its treatment acquisition and pruning the edges, including selling the Evoqua Magneto business out of Water Infrastructure for $61 million, which signals a willingness to keep the portfolio focused on the highest-return water assets rather than holding everything it bought. Recurring services and smart-metering analytics add a layer of stickier, software-adjacent revenue on top of the equipment, and the balance sheet is strong enough to keep funding the growth, with interest coverage near 49 times. Analysts have leaned positive on the margin trajectory and on data-center-related water demand, with price targets clustering well above the current price.

Bear Case

The most honest bear argument here is what the valuation methods are saying, and they are not subtle: not one family of method reaches today's price. The asset-based lens lands at well under half the price, the earnings-power methods at roughly a third of it, the peer-multiple lens below it, and even the forward-growth method does not get there. When every approach says the price is rich, the conservative reads are usually the more honest ones, because they are anchored on what the business has actually earned rather than on what it might. The price is a bet beyond what any standard frame supports, and the burden of proof sits entirely on the growth continuing.

The inversion quantifies that burden. At about 26 times operating income, the price embeds roughly 24.9% annual operating-profit growth sustained for five years. That near-term rate is within what Xylem has recently delivered, so the stretch is not the pace but its persistence: only about 30% of comparable fast-growers have sustained this level even five years, and the company sits in the upper half of its peer multiple range while doing it. If the growth fades toward the 2% to 4% organic rate the company itself guides for 2026, the multiple has a long way to compress, because a low-single-digit grower does not warrant a high-twenties multiple of operating income.

The demand is also not as immune as the secular story suggests, which is where the model disagreement gets its teeth. The 10-K names the dependencies plainly: results turn on the "availability of commercial financing for our customers and end-users" and the "availability of funding for our public se"ctor customers, the municipalities whose budgets fund water projects. Regulatory uncertainty, it warns, "could materially and adversely affect our business." Municipal capital spending can stall when budgets tighten or rates stay high, and a meaningful chunk of Xylem's revenue ultimately depends on public-sector willingness and ability to spend. The static methods price that risk; the share price assumes it away. That gap is the bear case.

Valuation

At the current price the market pays about 26 times company-wide operating income, which inverts to roughly 24.9% annual operating-profit growth held for five years. That near-term rate is within Xylem's recent record, so the demanding assumption is duration rather than rate, and the historical caveat is sharp: only about 30% of comparable fast-growers sustained this pace even five years, and Xylem already trades in the upper half of its peer multiple range. The label the read carries is elevated, above what the fundamentals comfortably support.

The valuation families are unusually unanimous, and that unanimity is the signal. The price sits at roughly 2.6 times where the asset-based methods land, about 3.1 times the earnings-power methods, near twice the peer-multiple lens, and above the forward-growth method as well. No family reaches the price. For a high-quality compounder that is not necessarily a verdict that the business is bad; it is a verdict that the price already credits years of continued execution. The reconciliation between the static lenses and the forward one is simply that the market is paying for the growth and the margin expansion to keep arriving, which the methods that anchor on trailing results cannot frame.

Solvency is the comfortable part of the picture. Net debt of about $1.8 billion is under twice trailing operating income, and interest coverage near 49 times means the balance sheet is not a source of risk; it is an asset that funds the bolt-on acquisitions and the buildout. The share count has risen, partly reflecting acquisition-funded shares, which dilutes per-share growth slightly and is worth tracking against the EBITDA gains. The downside here is not financial distress; it is multiple compression if the growth normalizes toward the low-single-digit organic rate the company guides for 2026.

Catalysts

The fourth-quarter and full-year 2025 results, reported in February 2026, set a record. Full-year revenue reached $9.0 billion, up 6% reported and 5% organically, with fourth-quarter revenue of $2.4 billion and adjusted earnings up on productivity and price realization. The quality of the result was in the margin, which the company has been lifting through optimization rather than relying on volume alone, and the book-to-bill running above one earlier in the year pointed to a healthy backlog feeding forward demand.

The forward catalyst is the 2026 guidance and whether the margin expansion lands. Management initiated full-year 2026 revenue guidance of $9.1 to $9.2 billion, organic growth of 2% to 4%, and an adjusted EBITDA margin of roughly 22.9% to 23.3%, up 70 to 110 basis points from 2025. The organic growth rate is the number that matters most for the thesis, because the price embeds far more than that, so any acceleration or deceleration against the 2% to 4% range will move the valuation debate directly.

Sentiment is constructive but stretched. The stock carries a consensus buy rating, with a median price target around $157 and recent moves higher into a roughly $160 to $173 range citing margin progress and data-center-related water demand, though some firms have reset targets lower. The events most likely to move the thesis are the quarterly organic-growth prints against guidance, the cadence of margin expansion, and any shift in municipal and industrial capital-spending appetite.

Peer Cohorts (Per Segment, With Filing Citations)

Water Infrastructure (reported)

• FLS (FLOWSERVE CORP)
• FY2025 10-K: …power consumption, reduce carbon emissions, improve plant productivity and reliability, and provide operational cost savings. Digitization We are leveraging technology and data to improve our, and our customers', operations. With a goal of digitizing our existing installed base and new original equipment, we focus on…
• FY2025 10-K: …short-term and long-term initiatives and accelerates growth through three key areas: diversification, decarbonization, and digitization (the "3D Strategy"). The goal of our 3D Strategy is to utilize our leadership in the flow control industry, and through our commitment to research and development ("R&D"), create…
• GRC (The Gorman-Rupp Company)
• FY2025 10-K: …Many of the larger units comprise encased, 3 Table of Contents fully-integrated water and wastewater pumping stations. In certain cases, units are designed for the inclusion of customer-supplied drives. The Company's larger pumps are sold principally for use in the construction, industrial, water and wastewater…
• FY2025 10-K: …(1) loss of key personnel; (2) intellectual property security; (3) growth through acquisitions; (4) the Company's indebtedness and how it may impact the Company's financial condition and the way it operates its business; (5) impairment in the value of intangible assets, including goodwill; (6) defined benefit pension…
• FELE (FRANKLIN ELECTRIC CO., INC.)
• FY2025 10-K: …compounded annual sales growth in developing regions in recent years. Water Systems competes in each of its targeted markets based on product design, quality, performance, availability and price. The Company's principal competitors in the specialty water products industry are Grundfos Management A/S, Pentair, Inc.…
• FY2025 10-K: …results, for purposes of determining portions of management compensation and for benchmarking against similar measures used by peers and competitors. These results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the…
• PNR (Pentair plc)
• FY2025 10-K: …food and beverage, and industrial vertical markets. Seasonality We have historically experienced increased demand following warm weather trends for residential water supply and agricultural products. Such demand historically has been at seasonal highs from April to August. Seasonal effects may vary from year to year…
• FY2025 10-K: …commercial and food and beverage vertical markets. Customers also include end users, consumers and original equipment manufacturers. Seasonality We experience seasonal demand with several end customers and end users within Water Solutions. End-user demand for water solution products generally follows warm weather…
• MWA (MUELLER WATER PRODUCTS, INC.)
• FY2025 10-K: …Water Management Solutions business unit were approximately 42% of fiscal 2025 consolidated net sales. Business Strategy Our business strategy is to capitalize on the large, attractive and growing water infrastructure markets worldwide. Key elements of this strategy are as follows: Improve operational excellence and…
• FY2025 10-K: …in this Annual Report to a particular year, we mean our fiscal year ended or ending September 30 in that particular calendar year. We manage our business and report operations through two business segments, Water Flow Solutions and Water Management Solutions, based largely on the products they sell and the customers…
• IEX (IDEX CORP)
• FY2025 10-K: Lease liability 27.8 26.1 Restructuring 3.0 0.9 Accrued interest 11.7 12.7 Other 49.0 45.0 Accrued expenses $ 297.0 $ 278.7 5. Revenue Disaggregation of Revenue The Company has a comprehensive offering of products, including technologies, built to customers' specifications that are sold in niche markets throughout the…
• FY2025 10-K: ABEL maintains operations in Büchen, Germany and Mansfield, Ohio and has facilities in Madrid, Spain and Mumbai, India. Water. Water is a leading provider of metering technology, flow monitoring products and underground surveillance services for wastewater markets, as well as alloy and non-metallic gear pumps and…

Applied Water (reported)

• PNR (Pentair plc)
• FY2025 10-K: …separation technologies for the oil and gas industry, residential and municipal wells, water treatment, wastewater solids handling, pressure boosting, circulation and transfer, fire suppression, flood control, agricultural irrigation and crop spray. • Water Solutions - The focus of this segment is to provide great…
• FY2025 10-K: …commercial and food and beverage vertical markets. Customers also include end users, consumers and original equipment manufacturers. Seasonality We experience seasonal demand with several end customers and end users within Water Solutions. End-user demand for water solution products generally follows warm weather…
• FELE (FRANKLIN ELECTRIC CO., INC.)
• FY2025 10-K: …of substation circuit breakers • Developed EVO LLD (line leak detection) to detect and minimize leaks Distribution Segment The Distribution segment is operated as a collection of wholly owned leading groundwater distributors known as the Headwater Companies. Headwater Companies deliver quality products and leading…
• FY2025 10-K: …for the Company's growth as a global provider of water and energy systems, through geographic expansion and product line extensions, leveraging its global platform and competency in system design, all while consistently offering the best value to its customer. Markets and Applications The Company's business consists…
• GGG (GRACO INC.)
• FY2025 10-K: …then supply to their customers. Industrial The Industrial division designs and manufactures liquid finishing and advanced fluid dispensing equipment; pumps to move chemicals, petroleum, food, and other fluids; and systems, components, and accessories for the automatic lubrication of bearings, gears, and generators.…
• FY2025 10-K: …pumps for use in the semiconductor industry; high pressure and ultra-high pressure valves used in the oil and natural gas industry; and environmental monitoring and remediation equipment that is used to conduct ground water sampling, ground water remediation, and for landfill liquid and gas management. This segment…
• WTS (WATTS WATER TECHNOLOGIES INC)
• FY2025 10-K: …we compared the Company's prior year estimate of product demand, which was primarily developed based on historical sales experience, to current year sales and other inventory movements to evaluate the assumption that historical sales experience was indicative of future product demand. We also inspected and evaluated…
• FY2025 10-K: …of the Compensation Committee ​ (3) Member of the Governance and Sustainability Committee ​ Robert J. Pagano, Jr. has served as Chief Executive Officer, President and a director of the Company since May 2014 and as Chairperson of the Board of Directors since February 2022. He also served as interim Chief Financial…
• GRC (The Gorman-Rupp Company)
• FY2025 10-K: …Many of the larger units comprise encased, 3 Table of Contents fully-integrated water and wastewater pumping stations. In certain cases, units are designed for the inclusion of customer-supplied drives. The Company's larger pumps are sold principally for use in the construction, industrial, water and wastewater…
• FY2025 10-K: …to customers at a point in time, with the exception of certain highly customized pump products, which are transferred to the customer over time. The Company offers standard warranties for its products to ensure that its products comply with agreed-upon specifications in its contracts. For standard warranties, these…
• AOS (A. O. Smith Corporation)
• FY2025 10-K: …lines of residential and commercial gas and electric water heaters, boilers, heat pumps, tanks and water treatment products. Both segments primarily manufacture and market in their respective regions of the world. Our Rest of World segment is primarily comprised of China, India, and Europe. NORTH AMERICA Sales in our…
• FY2025 10-K: …in the Rest of World segment. The purchase price consists of an initial cash payment of $ 117.9 million upon the closing of the transaction and a separate payment of $ 6.7 million made under a transitional supply agreement with Unilever. The Company incurred acquisition costs of approximately $ 1.4 million. The…

Measurement and Control Solutions (reported)

• BMI (BADGER METER, INC.)
• FY2025 10-K: …of radio endpoints, along with remote telemetry units, providing customers with a choice of industry-leading options for communicating data from hardware into use-specific software applications. The Company's hardware-enabled software solutions provide insights and analytics critical to the holistic management of our…
• FY2025 10-K: …fluids and are known for accuracy, long-lasting durability and for providing valuable and timely flow measurement data. • water quality monitoring solutions, including optical sensing and electrochemical instruments that provide real-time, on-demand data parameters. • high frequency pressure and acoustic leak…
• ITRI (Itron, Inc.)
• FY2025 10-K: …sensors, and data analytics operating upon a flexible technology platform that allows our customers to address the changing macro trends listed above, as well as the pressing industry challenges to better manage and control assets, intelligently benchmark, secure revenue, lower operational costs, improve customer…
• FY2025 10-K: …and municipalities to safely, securely, and reliably operate their critical infrastructure. Our solutions include the deployment of smart networks, software, services, devices, sensors, and data analytics that allow our customers to manage assets, secure revenue, lower operational costs, improve customer service,…
• MWA (MUELLER WATER PRODUCTS, INC.)
• FY2025 10-K: …to offer non-invasive leak detection and pipe condition assessment services is a key competitive advantage. With our Singer Valve and i2O products, we provide a range of intelligent water solutions including pressure control valves, advanced pressure management, network analytics, event management and data logging.…
• FY2025 10-K: …is in the process of transitioning from manually read meters to electronically read meters; however, we expect this transition to be relatively slow and that many end users will be reluctant to adopt brands other than their historically preferred brand. Our principal competitors in water metering products and systems…

Water Solutions and Services (reported)

• TTEK (TETRA TECH, INC.)
• FY2025 10-K: …for commercial and government clients across the municipal water, energy, transportation, defense and manufacturing sectors. Both CAW and SAGE are included in our CIG segment. In fiscal 2024, we acquired LS Technologies ("LST"), an innovative U.S. federal enterprise technology services and management consulting firm…
• FY2025 10-K: …a long track record of s uccessful performance that results in repeat business and limits competition. We believe that proximity to our clients is also instrumental to integrating global experience and resources with an understanding of our local clients' needs. Throughout our history, we have supported both public…
• CECO (CECO ENVIRONMENTAL CORP.)
• FY2025 10-K: …We believe that the breadth and diversity of our products and services together with our ability to deliver full solutions to various end markets provides us with multiple sources of stable growth, relative scale benefits, and a competitive advantage relative to other players in the industry, and we will continue to…
• FY2025 10-K: …solutions enhances our overall customer relationships and provides us with a competitive advantage in our markets relative to other companies in the industry. We believe this is evidenced by our strong relationships with many world-class customers. We believe no single competitor has the resources to offer a similar…
• MWA (MUELLER WATER PRODUCTS, INC.)
• FY2025 10-K: …Index to Financial Statements Water Management Solutions Net sales for 2025 were $604.8 million as compared with $559.2 million in the prior year, an increase of $45.6 million or 8.2%, primarily as a result of higher sales volumes in hydrants and repair and installation products as well as higher pricing across most…
• FY2025 10-K: …is in the process of transitioning from manually read meters to electronically read meters; however, we expect this transition to be relatively slow and that many end users will be reluctant to adopt brands other than their historically preferred brand. Our principal competitors in water metering products and systems…
• ECL (ECOLAB INC.)
• FY2025 10-K: …Global Water reportable segment follow below. ​ Light & Heavy ​ Light & Heavy serves customers across industrial and institutional markets. Within Light & Heavy, our markets include food and beverage, manufacturing and transportation, institutional clients, including commercial buildings, hospitals, universities and…
• FY2025 10-K: -efficiency solutions. By partnering with our customers to help them do more with less through the use of our innovative and differentiated solutions, we aim to help our customers conserve more than 300 billion gallons of water annually by 2030. In 2024, we helped our customers conserve more than 226 billion gallons…
• VLTO (VERALTO CORPORATION)
• FY2025 10-K: …associates work alongside customers across many industries to understand their water challenges and tailor chemical treatment plans and dosing protocols to help optimize customers' water usage and maximize reuse, and reduce water pollution; our solutions helped customers save over 88 billion gallons of water in 2025.…
• FY2025 10-K: …backlog. As of December 31, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $ 325 million. The Company expects to recognize revenue on approximately 42 % of the remaining performance obligations over the next 12 months, 32 % over the subsequent 12…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.