Xylem trades at $143 per share and has stayed right on track with the overall market, gaining 10.2% over the last six months. At the same time, the S&P 500 has returned 10.5%.
Is now a good time to buy XYL? Find out in our full research report, it’s free.
Why Does XYL Stock 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 performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Xylem grew its sales at an excellent 12% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Xylem’s EPS grew at a remarkable 14.4% compounded annual growth rate over the last five years, higher than its 12% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
One Reason to be Careful:
Slow Organic Growth Suggests Waning Demand In Core Business
In addition to reported revenue, organic revenue is a useful data point for analyzing Water Infrastructure companies. This metric gives visibility into Xylem’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Xylem’s organic revenue averaged 6.4% year-on-year growth. This performance slightly lagged the sector and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations. 
Final Judgment
Xylem’s merits more than compensate for its flaws, but at $143 per share (or 29.2× forward P/E), is now the right time to buy the stock? See for yourself in our comprehensive research report, it’s free.
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