Based on the provided data and recent market activity, here's a comprehensive analysis of XYL's valuation:
Recent Performance and Valuation Metrics
XYL's Q4 2024 results showed mixed performance. While revenue grew 6.5% to $2.256 billion and earnings increased to $326 million ($1.34 per share), it missed analyst estimates of $1.13 per share for adjusted earnings of $1.10.
Valuation Analysis
The stock currently trades at:
- P/E: 31.74x (Q4 2024), down from 44.96x in Q1 2024
- EV/EBITDA: 16.78x, showing improvement from 20x in Q1 2024
- P/S: 3.30x
- P/B: 2.65x
These metrics indicate XYL has become more reasonably valued compared to earlier in 2024, though still commands premium multiples reflecting its market leadership in water technology.
Analyst Sentiment
Recent analyst actions show mixed but generally positive sentiment:
- Baird raised PT to $148 (Feb 5, 2025)
- Stifel lowered PT to $150 but maintains Buy rating (Jan 24, 2025)
- Citigroup maintains Buy with $147 PT (Jan 13, 2025)
Growth and Margins
- Revenue growth remains solid at 6.5% YoY
- Gross margin improved to 37.99% in Q4 2024
- Net margin strengthened to 14.45% in Q4 2024
- ROE shows improvement trend through 2024
Conclusion
While XYL carries premium valuation multiples, they appear justified given:
- Market leadership in critical water technology sector
- Improving margins and profitability metrics
- Strong analyst support with multiple Buy ratings
- Reasonable valuation compared to historical levels
The stock appears fairly valued at current levels, with potential upside supported by improving fundamentals and positive analyst sentiment.