Since December 2024, Xylem has been in a holding pattern, posting a small loss of 1.6% while floating around $125.70.
Given the underwhelming price action, is now a good time to buy XYL? Or should investors expect a bumpy road ahead? Find out in our full research report, it’s free.
Why Does Xylem Spark Debate?
Formed through a spinoff, Xylem (NYSE:XYL) manufactures and services engineered products across a wide variety of applications primarily in the water sector.
Two Positive Attributes:
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Xylem’s sales grew at an impressive 10.9% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers. 
2. EPS Increasing Steadily
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Xylem’s solid 10.1% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.
One Reason to be Careful:
New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Xylem’s ROIC averaged 4.4 percentage point decreases each year. If its returns keep falling, it could suggest its profitable growth opportunities are drying up. We’ll keep a close eye.
Final Judgment
Xylem has huge potential even though it has some open questions, but at $125.70 per share (or 26.4× forward P/E), is now the right time to buy the stock? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More Than Xylem
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