Xylem Inc. (XYL): A Bull Case Theory

We came across a bullish thesis on Xylem Inc. on Security Analysis’s Substack by Value Stock Geek. In this article, we will summarize the bulls’ thesis on XYL. Xylem Inc.'s share was trading at $146.00 as of October 13th. XYL’s trailing and forward P/E were 38.80 and 27.78, respectively according to Yahoo Finance.

Xylem (XYL) is a leading pure-play water technology company dedicated to ensuring communities, industries, and utilities have access to clean and reliable water. The company designs and sells a comprehensive range of solutions, including pumps, treatment systems, meters, and advanced digital platforms, while generating recurring revenue through maintenance contracts, software subscriptions, analytics, and equipment rentals.

This dual approach allows customers to manage water efficiently, sustainably, and cost-effectively, while addressing environmental challenges. Xylem is well-positioned to benefit from long-term global trends such as urbanization, climate change, water scarcity, and tightening environmental regulations, all of which increase demand for resilient and advanced water infrastructure.

Xylem’s origins trace back to ITT Corporation, which spun off its water businesses in 2011 to form an independent company focused entirely on water technology. Since its inception, Xylem has established itself as a global leader through its Water Solutions, Analytics, and Applied Water Systems units. Under successive leadership, the company has expanded strategically, most notably through the $7.5 billion all-stock acquisition of Evoqua Water Technologies in 2023, which significantly enhanced Xylem’s advanced treatment capabilities and solidified its position as the world’s largest pure-play water technology firm.

Innovation remains central to Xylem’s strategy, exemplified by projects like Reuse Brew in Germany, which showcased the practical potential of modern water reuse technologies. By 2024, Xylem generated $8.56 billion in revenue, with a diversified geographic footprint spanning the U.S., Western Europe, Emerging Markets, and other regions.

The company addresses critical global water challenges—scarcity, quality, affordability, and resilience—through products and services that improve efficiency, reduce waste, and extend infrastructure life. With strong market leadership, diversified offerings, and exposure to growing structural tailwinds, Xylem represents a compelling investment opportunity in the water technology sector.

Previously we covered a bullish thesis on Graco Inc. (GGG) by Stock Analysis Compilation in December 2024, which highlighted its premium fluid handling products, strong margins, and stable demand from parts and accessories. The stock has depreciated approximately 4.35% since our coverage, reflecting economic weakness. The thesis still stands, while Value Stock Geek shares a similar focus but emphasizes Xylem’s water infrastructure exposure.

Xylem Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 45 hedge fund portfolios held XYL at the end of the second quarter which was 39 in the previous quarter. While we acknowledge the potential of XYL as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.