Xylem Inc. (NYSE:XYL) saw significant share price movement during recent months on the NYSE, rising to highs of US$84.41 and falling to the lows of US$73.74. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Xylem's current trading price of US$76.83 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Xylem’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Xylem?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 9.94% above my intrinsic value, which means if you buy Xylem today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $69.88, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Xylem’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Xylem look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Xylem’s earnings over the next few years are expected to increase by 31%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? XYL’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on XYL, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Xylem. You can find everything you need to know about Xylem in the latest infographic research report. If you are no longer interested in Xylem, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.