Does Xylem Inc’s (NYSE:XYL) 27% Earnings Growth Reflect The Long-Term Trend?
Investors with a long-term horizong may find it valuable to assess Xylem Inc’s (NYSE:XYL) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Xylem is currently performing.
Check out our latest analysis for Xylem
How Did XYL’s Recent Performance Stack Up Against Its Past?
XYL’s trailing twelve-month earnings (from 30 September 2018) of US$395m has jumped 27% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 5.5%, indicating the rate at which XYL is growing has accelerated. How has it been able to do this? Well, let’s take a look at whether it is solely because of industry tailwinds, or if Xylem has experienced some company-specific growth.
In terms of returns from investment, Xylem has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. Furthermore, its return on assets (ROA) of 6.5% is below the US Machinery industry of 6.6%, indicating Xylem’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Xylem’s debt level, has declined over the past 3 years from 12% to 11%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 56% to 96% over the past 5 years.
What does this mean?
Xylem’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Xylem has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Xylem to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for XYL’s future growth? Take a look at our free research report of analyst consensus for XYL’s outlook.
Financial Health: Are XYL’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 September 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
