Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Xylem Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 1.9% to 14.8% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 72, DPO 72, DIO 75). At a 8.6% WACC with mid-year discounting, the terminal value (86% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 17.3x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $97.19 per share, suggesting XYL is overvalued by 19.0% at the current price of $120.04.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 991 | 1,035 | 1,088 | 1,153 | 1,324 | 1,357 |
| (−) Net Interest | 71 | 74 | 78 | 83 | 95 | 97 |
| (+) D&A | 268 | 296 | 327 | 349 | 365 | 374 |
| EBITDA | 1,330 | 1,405 | 1,492 | 1,584 | 1,784 | 1,829 |
| (−) Tax | 154 | 160 | 169 | 179 | 205 | — |
| (−) CapEx | 347 | 363 | 381 | 404 | 464 | — |
| (−) ΔWC | 133 | 83 | 99 | 123 | 321 | — |
| Free Cash Flow (FCF) | 696 | 799 | 844 | 879 | 794 | — |
| Peers' EBITDA Multiple | 17.3x | |||||
| Terminal Value | 31,564 | |||||
| WACC / Discount Rate | 8.58% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 668 | 707 | 687 | 659 | 548 | 20,911 |
| Enterprise Value | 24,179 | |||||
| Projection Period | 3,268 | 13.5% | ||||
| Terminal Value | 20,911 | 86.5% | ||||
| (−) Current Net Debt | 463 | |||||
| Equity Value | 23,716 | |||||
| (÷) Outstanding Shares | 244M | |||||
| Fair Price | $97 | -19.0% | ||||
| WACC \ EV/EBITDA Exit Multiple | 13.3x | 15.3x | 17.3x | 19.3x | 21.3x |
|---|---|---|---|---|---|
| 6.6% | $84 | $95 | $106 | $117 | $128 |
| 7.6% | $81 | $91 | $102 | $112 | $122 |
| 8.6% | $77 | $87 | $97 | $107 | $117 |
| 9.6% | $74 | $84 | $93 | $103 | $112 |
| 10.6% | $71 | $80 | $89 | $98 | $107 |
Current price: $120.04. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 5-year projection period. Revenue, expenses, D&A, and working capital are projected using the same line-by-line approach as the Growth Exit models. The key difference is the terminal value methodology: instead of assuming perpetual cash flow growth, the terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 6 EBITDA.
Using a peer exit multiple anchors the terminal value to how the market currently prices comparable companies, rather than relying on a theoretical perpetual growth assumption. This approach captures relative valuation dynamics and is particularly useful when a company is expected to converge toward industry-average profitability over time. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.