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Xylem Inc. (XYL) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Xylem Inc. (XYL)

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Intrinsic Value (DCF)

Current$144.81
→
Intrinsic$73.89
-49%
$49.19$73.89$120.83
Market implies 27% growth for 5 years
Current price reflects execution expectations above 11% growth — not unreasonable for quality businesses.
At $145, the market prices in continued strong cash flow growth (27%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $49 → Bull $121. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →7%9%11%13%
8%$89$97$106$116
10%$62$68$74$80
12%$47$51$56$61
14%$38$41$45$48

Bull Case

  • Bull case ($121) with 13% growth, 9% discount rate
  • Conservative 11% growth assumption is achievable based on track record

Bear Case

  • Bear case ($49) implies 66% downside at 8% growth, 12% discount
  • Price reflects 27% growth expectations vs 11% historical — high bar to clear
  • Trading 49% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$1.04B
Year 2$1.15B
Year 3$1.27B
Year 4$1.41B
Year 5$1.56B
Terminal$22.89B

📐 Model Inputs

Growth Rate10.6%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$942.00MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is XYL stock undervalued or overvalued?
🔴 OVERVALUED

XYL trades at $144.81 vs. our DCF-derived intrinsic value of $73.89, implying -48% downside. Using a 10.0% WACC and 10.6% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($105.03) suggests limited upside.

What is XYL's intrinsic value?

Using a 5-year DCF model: Base FCF of $942M, projected at 10.6% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $1.00B net debt and dividing by 0.24B shares: Bear $51.13 | Base $73.89 | Bull $105.03. Current price $144.81 implies -48% to base case.

How is XYL's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 10.6% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($19.00B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 20.2x.