XYL – Market expectations are for Uniform ROA to expand, but management may have concerns about growth, inflation, and margins
- Xylem Inc. (XYL) currently trades above corporate and historical averages relative to Uniform earnings, with a 30.0x Uniform P/E (Fwd. V/E’).
- At these levels, markets are pricing in expectations for Uniform ROA to expand to 20%, accompanied by 5% Uniform asset growth.
- Meanwhile, analysts expect Uniform ROA to slightly improve to 18% in 2023, accompanied by 2% Uniform asset growth.
- If sustained going forward, these levels would imply a stock price closer to $66, representing approximately 23% equity downside for the firm.
- Moreover, the firm’s most recent earnings call suggests management may have concerns about growth, inflation, and margins.