Xylem Inc. scores 74 for management and 73 for moat. The management score rests on a return on invested capital of 6.4% and a gross margin of 38.5% — figures that describe a business earning a respectable return on what it employs. Debt sits at 0.18x equity.
Three independent anchors set the price worth paying. Growth is modelled at 13.1% a year, the rate measured from the filings. The exit multiple assumed is 26.3x. That produces an intrinsic value of $93.59, a 10-CAP price of $44.90 and a payback time price of $65.11, with the value zone set at the highest of the three, $65.11. Today's price of $100.92 is 55% above it.
A wonderful business at the wrong price is still the wrong price. Xylem Inc. scores well on the business and poorly on the entry point, which is the most common shape in a long bull market.
| Price | $100.92 |
| Market cap | $23.6B |
| P/E ratio | 24.0x |
| Return on invested capital | 6.4% |
| Gross margin | 38.5% |
| Debt to equity | 0.18x |
| Free cash flow yield | 2.7% |
| Growth rate used | 13.1% |
| Growth rate measured | 13.0% |
| Exit multiple assumed | 26.3x |
| Company | Moat | Buy price |
| Otis Worldwide (OTIS) | 23 | $45.54 |
| Dover Corporation (DOV) | 65 | $91.40 |
| Nordson Corporation (NDSN) | 73 | $136.98 |
| Ingersoll Rand (IR) | 60 | $48.42 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Xylem Inc. rather than accepting ours.