Xylem (NYSE:XYL) & Pentair (NYSE:PNR) Critical Survey

Pentair (NYSE:PNR) and Xylem (NYSE:XYL) are both large-cap business services companies, but which is the better stock? We will contrast the two companies based on the strength of their earnings, institutional ownership, profitability, analyst recommendations, risk, valuation and dividends.

Analyst Ratings

This is a summary of current recommendations for Pentair and Xylem, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Pentair	3	2	10	0	2.47
Xylem	0	6	8	0	2.57

Pentair currently has a consensus target price of $107.86, indicating a potential upside of 43.00%. Xylem has a consensus target price of $153.54, indicating a potential upside of 28.88%. Given Pentair’s higher possible upside, equities analysts clearly believe Pentair is more favorable than Xylem.

Profitability

This table compares Pentair and Xylem’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Pentair	15.98%	21.92%	12.21%
Xylem	10.79%	11.26%	7.30%

Institutional & Insider Ownership

92.4% of Pentair shares are owned by institutional investors. Comparatively, 88.0% of Xylem shares are owned by institutional investors. 1.3% of Pentair shares are owned by company insiders. Comparatively, 0.3% of Xylem shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Dividends

Pentair pays an annual dividend of $1.08 per share and has a dividend yield of 1.4%. Xylem pays an annual dividend of $1.72 per share and has a dividend yield of 1.4%. Pentair pays out 26.5% of its earnings in the form of a dividend. Xylem pays out 42.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Pentair has raised its dividend for 7 consecutive years and Xylem has raised its dividend for 2 consecutive years.

Valuation & Earnings

This table compares Pentair and Xylem”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Pentair	$4.20 billion	2.90	$653.80 million	$4.08	18.49
Xylem	$9.04 billion	3.13	$957.00 million	$4.02	29.63

Xylem has higher revenue and earnings than Pentair. Pentair is trading at a lower price-to-earnings ratio than Xylem, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Pentair has a beta of 1.03, suggesting that its stock price is 3% more volatile than the S&P 500. Comparatively, Xylem has a beta of 1.03, suggesting that its stock price is 3% more volatile than the S&P 500.

Summary

Pentair beats Xylem on 10 of the 16 factors compared between the two stocks.

About Pentair

Pentair plc provides various water solutions in the United States, Western Europe, China, Eastern Europe, Latin America, the Middle East, Southeast Asia, Australia, Canada, and Japan. The company operates through three segments: Flow, Water Solutions, and Pool. The Flow segment designs, manufactures, and sells fluid treatment and pump products and systems, including pressure vessels, gas recovery solutions, membrane bioreactors, wastewater reuse systems and advanced membrane filtration, separation systems, water disposal pumps, water supply pumps, fluid transfer pumps, turbine pumps, solid handling pumps, and agricultural spray nozzles for fluid delivery, ion exchange, desalination, food and beverage, separation technologies in the oil and gas industry, residential and municipal wells, water treatment, wastewater solids handling, pressure boosting, circulation and transfer, fire suppression, flood control, agricultural irrigation, and crop spray in residential, commercial, and industrial markets. The Water Solutions segment provides commercial and residential water treatment products and systems, including pressure tanks, control valves, activated carbon products, commercial ice machines, conventional filtration products, and point-of-entry and point-of-use water treatment systems, as well as installation and preventative services for use in residential whole home water filtration, drinking water filtration, and water softening solutions, as well as commercial total water management and filtration in foodservice operations. The Pool segment provides residential and commercial pool equipment and accessories comprising pumps, filters, heaters, lights, automatic controls, automatic cleaners, maintenance equipment, and pool accessories for applications in residential and commercial pool maintenance, pool repair, renovation, service, and construction and aquaculture solutions. Pentair plc was founded in 1966 and is headquartered in London, the United Kingdom.

About Xylem

Xylem Inc., together with its subsidiaries, engages in the design, manufacture, and servicing of engineered products and solutions worldwide. It operates through four segments: Water Infrastructure, Applied Water, Measurement & Control Solutions, and Integrated Solutions and Services. The Water Infrastructure segment offers products, including water, storm water, and wastewater pumps; controls and systems; filtration, disinfection, and biological treatment equipment; and mobile dewatering equipment and rental services under the ADI, Flygt, Godwin, Sanitaire, Magneto, Neptune Benson, Ionpure, Leopold, Wedeco, and Xylem Vue brands. The Applied Water segment provides pumps, valves, heat exchangers, controls, and dispensing equipment systems under the Goulds Water Technology, Bell & Gossett, A-C Fire Pump, Standard Xchange, Lowara, Jabsco, Xylem Vue, and Flojet brands. The Measurement & Control Solutions segment offers smart meters, networked communication devices, data analytics, test equipment, controls, sensor devices, software and managed services, and critical infrastructure services; and software and services, including cloud-based analytics, remote monitoring and data management, leak detection, condition assessment, asset management, and pressure monitoring solutions, as well as testing equipment. This segment sells its products under the Pure Technologies, Sensus, Smith Blair, WTW, Xylem Vue, and YSI brands. The Integrated Solutions and Services segment provides maintenance services, mobile services, digital outsourced solutions, wastewater systems, environmental remediation, odor and corrosion control, filtration, reverse osmosis, ion exchange, and deionization under Aquapro, WaterOne, and Ion Pure brands. Xylem Inc. was formerly known as ITT WCO, Inc. and changed its name to Xylem Inc. in May 2011. Xylem Inc. was incorporated in 2011 and is headquartered in Washington, District of Columbia.