Xylem Inc. (NYSE:XYL): Is It A Smart Long Term Opportunity?
Since Xylem Inc. (NYSE:XYL) released its earnings in September 2018, the consensus outlook from analysts appear fairly confident, as a 41% increase in profits is expected in the upcoming year, relative to the past 5-year average growth rate of 5.5%. With trailing-twelve-month net income at current levels of US$331m, we should see this rise to US$468m in 2019. Below is a brief commentary on the longer term outlook the market has for Xylem. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
See our latest analysis for Xylem
Exciting times ahead?
The longer term view from the 18 analysts covering XYL is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of XYL’s earnings growth over these next few years.
This results in an annual growth rate of 16% based on the most recent earnings level of US$331m to the final forecast of US$627m by 2021. EPS reaches $4.4 in the final year of forecast compared to the current $1.84 EPS today. In 2021, XYL’s profit margin will have expanded from 7.0% to 11%.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Xylem, I’ve compiled three important factors you should further research:
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Valuation: What is Xylem worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Xylem is currently mispriced by the market.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Xylem? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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.
