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Xylem Inc.

Intrinsic Value Analysis (Discounted Cash Flow)Industry: Industrial - Capital GoodsSector: Industrials

Fair Value Summary

Current Price$137.56
5Y Range70.72 – 107.72
5Y Selected89.22
(-) Safety Margin74.93%
5Y Buy Price$22.37
Upside (to Buy Price)-83.74%
10Y Range76.68 – 113.50
10Y Selected95.09
(-) Safety Margin74.93%
10Y Buy Price$23.84
Upside (to Buy Price)-82.67%

Company Predictability & Safety

MetricValue
Revenue R2 (5Y)0.9010
Revenue R2 (10Y)0.7903
Net Income R2 (5Y)0.8436
Net Income R2 (10Y)0.4358
EBITDA R2 (5Y)0.8015
EBITDA R2 (10Y)0.5086
FCF R2 (5Y)0.3000
FCF R2 (10Y)0.3287
Safety Score0.2507

DA 10-Year Projection

Metric2025202620272028202920302031203220332034
% Growth4.51%4.45%4.40%4.34%4.28%4.23%4.17%4.11%4.06%4.00%
Revenue8,948.039,346.419,757.2410,180.6210,616.6111,065.2811,526.6512,000.7412,487.5512,987.06
EBITDA1,816.971,897.871,981.292,067.262,155.792,246.902,340.582,436.852,535.702,637.13
D&A-457.44-477.81-498.81-520.45-542.74-565.68-589.26-613.50-638.39-663.92
EBIT1,359.531,420.061,482.481,546.811,613.051,681.221,751.321,823.351,897.311,973.21
Pro forma Taxes-198.09-206.91-216.00-225.38-235.03-244.96-255.17-265.67-276.45-287.50
NOPAT1,161.441,213.151,266.481,321.431,378.021,436.261,496.141,557.681,620.871,685.70
Capital Expenditures-341.51-356.71-372.39-388.55-405.19-422.32-439.92-458.02-476.60-495.66
NWC Investment-43.72-45.12-46.53-47.95-49.38-50.81-52.25-53.69-55.13-56.57
(+) D&A457.44477.81498.81520.45542.74565.68589.26613.50638.39663.92
Free Cash Flow1,233.651,289.121,346.361,405.381,466.191,528.811,593.231,659.471,727.521,797.39
Diluted Shares Outstanding243,889,750.00243,889,750.00243,889,750.00243,889,750.00243,889,750.00243,889,750.00243,889,750.00243,889,750.00243,889,750.00243,889,750.00

Discounting Periods

MetricDec-25Dec-26Dec-27Dec-28Dec-29Dec-30Dec-31Dec-32Dec-33Dec-34
Period Start9/30/251/1/261/1/271/1/281/1/291/1/301/1/311/1/321/1/331/1/34
Period End12/31/2512/31/2612/31/2712/31/2812/31/2912/31/3012/31/3112/31/3212/31/3312/31/34
Mid-Point11/15/257/2/267/2/277/1/287/2/297/2/307/2/317/1/327/2/337/2/34
Time (t)0.100.451.452.463.464.465.466.467.468.46
Valuation Date1/17/26

Base Case Projected Flows

WACC: 9.10%Terminal Growth: 2.40%
Metric2025202620272028202920302031203220332034TV (5y)TV (10y)
Discount Factor0.990.960.880.810.740.680.620.570.520.48
PV UFCF1,222.961,239.591,186.661,134.401,084.791,036.79990.37945.52902.22860.42
Raw: 22,398.07
15,865.58
Raw: 27,457.59
12,584.15

Base Case Valuation

5-Year Horizon10-Year Horizon
UFCFUFCF
Enterprise Value21,733.9723,187.86
(-) Net Debt983.25983.25
Equity Value20,750.7222,204.61
(/) Shares Out243.89243.89
Fair Value$85.08$91.04
(-) Safety Margin74.93%74.93%
Buy Price$21.33$22.82
Current Price$137.56$137.56
Upside (to Buy Price)-84.49%-83.41%

Conservative Projected Flows

WACC: 10.10%Terminal Growth: 1.90%
Metric2025202620272028202920302031203220332034TV (5y)TV (10y)
Discount Factor0.990.960.870.790.720.650.590.540.490.44
PV UFCF1,221.841,234.511,171.071,109.221,051.08995.44942.24891.40842.85796.51
Raw: 18,212.91
12,443.22
Raw: 22,327.04
9,429.48

Conservative Valuation

5-Year Horizon10-Year Horizon
UFCFUFCF
Enterprise Value18,230.9319,685.62
(-) Net Debt983.25983.25
Equity Value17,247.6818,702.37
(/) Shares Out243.89243.89
Fair Value$70.72$76.68
(-) Safety Margin74.93%74.93%
Buy Price$17.73$19.22
Current Price$137.56$137.56
Upside (to Buy Price)-87.11%-86.02%

Aggressive Projected Flows

WACC: 8.10%Terminal Growth: 2.90%
Metric2025202620272028202920302031203220332034TV (5y)TV (10y)
Discount Factor0.990.970.890.830.760.710.650.600.560.52
PV UFCF1,224.081,244.731,202.611,160.391,119.911,080.251,041.441,003.48966.37930.13
Raw: 28,996.41
21,302.29
Raw: 35,546.44
17,692.53

Aggressive Valuation

5-Year Horizon10-Year Horizon
UFCFUFCF
Enterprise Value27,254.0128,665.92
(-) Net Debt983.25983.25
Equity Value26,270.7627,682.67
(/) Shares Out243.89243.89
Fair Value$107.72$113.50
(-) Safety Margin74.93%74.93%
Buy Price$27.00$28.46
Current Price$137.56$137.56
Upside (to Buy Price)-80.37%-79.31%

Reverse DCF: Market Implied Growth

Current Price$137.56
WACC Used9.1%
IMPLIED REVENUE GROWTH137.65%
Metric2027202820292030203120322033203420352036
Implied Revenue21,136.2850,229.62119,368.93283,676.07674,146.211,602,084.763,807,298.119,047,910.1021,502,040.2551,098,842.73
Constant Implied Growth137.65%137.65%137.65%137.65%137.65%137.65%137.65%137.65%137.65%137.65%
Implied Free Cash Flow2.115.0211.9428.3767.41160.21380.73904.792,150.205,109.88
Discount Factor0.930.810.740.680.620.570.520.480.440.40
Present Value of Implied FCF1.974.058.8319.2441.9191.28198.84433.13943.482,055.17

Rolling Historical DCF (Backtest)

Valuation based on actual realized growth.
YearValuation DateActual PriceRealized Growth (5Y)Calculated Fair ValueValuation Delta
20192019-12-31$78.796.94%$60.04-23.79%
20182018-12-31$66.724.27%$24.02-64.00%
20172017-12-31$68.201.01%$35.26-48.30%
20162016-12-31$49.521.23%$21.58-56.42%
20152015-12-31$36.506.09%$34.34-5.93%
20142014-12-31$38.0710.54%$34.94-8.23%
20132013-12-31$34.608.67%$19.55-43.49%
20122012-12-31$27.104.54%$24.28-10.41%
20112011-12-31$25.690.37%$21.90-14.77%
20102010-12-31$24.250.12%$25.364.57%
20092009-12-31$24.254.27%$30.7026.61%

Monte Carlo Simulation (1,000 Iterations)

Mean Fair Value
$93.28
Median
$91.01
10th Percentile
$76.74
90th Percentile
$113.23

Fair Value Distribution

$63.15 - $69.87
22
$69.87 - $76.58
77
$76.58 - $83.30
183
$83.30 - $90.01
191
$90.01 - $96.73
182
$96.73 - $103.44
136
$103.44 - $110.16
87
$110.16 - $116.87
50
$116.87 - $123.59
28
$123.59 - $130.30
18
$130.30 - $137.02
10
$137.02 - $143.73
5
$143.73 - $150.45
8
$150.45 - $157.16
0
$157.16 - $163.88
0
$163.88 - $170.59
1
$170.59 - $177.31
0
$177.31 - $184.02
0
$184.02 - $190.73
1
$190.73 - $197.45
1