Xylem (XYL): Exploring Valuation After Strong Q3 Results and Raised Full-Year Guidance

Xylem (NYSE:XYL) caught investors’ attention after reporting third-quarter results that topped expectations. The company raised its revenue and profit guidance for 2025, citing strong business momentum and positive signals for future growth.

See our latest analysis for Xylem.

Xylem’s upbeat earnings and raised 2025 guidance helped maintain its positive momentum. The share price is now up 30.1% year-to-date and the one-year total shareholder return is 27.8%. The recent results continue a five-year run that has rewarded investors with a 75% total return, reflecting steady business execution and growing market confidence in Xylem’s long-term prospects.

If you’re searching for more companies enjoying this kind of sustained momentum and growth, it might be time to broaden your discovery and check out fast growing stocks with high insider ownership

Still, the key question for investors is whether Xylem's recent gains have left the stock undervalued relative to its growth potential, or if the market has already priced in much of the optimism surrounding its improved outlook.

Most Popular Narrative: 4.9% Undervalued

At $150.85, Xylem’s share price sits below the most widely followed narrative’s fair value of $158.67. The narrative highlights the impact of digital transformation and infrastructure upgrades on recurring revenues and long-term market opportunities for Xylem.

Rapid adoption of smart metering and advanced monitoring solutions is driving double-digit growth in Xylem's Measurement and Control Solutions segment, reflecting resilient end-market demand for digital infrastructure upgrades. This is likely to drive revenue and expand higher-margin recurring earnings.

Read the complete narrative.

Curious why the narrative places Xylem’s future profit outlook on par with premium industrials? The answer involves bold assumptions on the pace of transformation and anticipated financial upside, a detail you won’t uncover anywhere else. Don’t miss what’s driving these elevated growth and valuation projections.

Result: Fair Value of $158.67 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent weakness in developing markets or unfavorable shifts in government funding could still pose risks to Xylem's projected growth trajectory.

Find out about the key risks to this Xylem narrative.

Another View: Peer and Industry Multiples Raise a Red Flag

While the narrative points to Xylem trading below fair value, a look at its current price-to-earnings ratio reveals a different story. Xylem trades at 38.7 times earnings, which is considerably higher than the industry average of 24 and the peer group average of 30.7. It also sits well above its fair ratio of 27.7. This premium means investors are paying up for Xylem’s perceived future growth, and it may not take much disappointment to put that premium at risk. Is the optimism behind the higher multiple truly justified?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Xylem Narrative

If you want a different perspective or prefer hands-on analysis, you can build your own narrative in just a few minutes with Do it your way

A great starting point for your Xylem research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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