Reviewing Flowserve Corporation (FLS) and Xylem (XYL)

Flowserve Corporation (NYSE: FLS) and Xylem (NYSE:XYL) are both mid-cap industrial products companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, earnings, risk, profitabiliy, analyst recommendations, institutional ownership and valuation.

Valuation & Earnings

This table compares Flowserve Corporation and Xylem’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Flowserve Corporation $3.91 billion 1.53 $445.71 million $0.93 49.35
Xylem $4.00 billion 2.55 $665.00 million $1.43 39.66

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

Volatility and Risk

Flowserve Corporation has a beta of 1.48, suggesting that its share price is 48% more volatile than the S&P 500. Comparatively, Xylem has a beta of 1.18, suggesting that its share price is 18% more volatile than the S&P 500.

Dividends

Flowserve Corporation pays an annual dividend of $0.76 per share and has a dividend yield of 1.7%. Xylem pays an annual dividend of $0.72 per share and has a dividend yield of 1.3%. Flowserve Corporation pays out 81.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Xylem pays out 50.4% of its earnings in the form of a dividend. Flowserve Corporation has increased its dividend for 10 consecutive years and Xylem has increased its dividend for 4 consecutive years. Flowserve Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

85.5% of Xylem shares are owned by institutional investors. 0.5% of Flowserve Corporation shares are owned by company insiders. Comparatively, 0.8% of Xylem shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

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

Net Margins Return on Equity Return on Assets
Flowserve Corporation 3.12% 15.76% 5.61%
Xylem 6.75% 15.53% 6.14%

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Flowserve Corporation and Xylem, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Flowserve Corporation 2 4 6 0 2.33
Xylem 0 4 10 0 2.71

Flowserve Corporation presently has a consensus price target of $50.44, suggesting a potential upside of 9.90%. Xylem has a consensus price target of $56.42, suggesting a potential downside of 0.53%. Given Flowserve Corporation’s higher possible upside, equities research analysts plainly believe Flowserve Corporation is more favorable than Xylem.

Summary

Xylem beats Flowserve Corporation on 12 of the 17 factors compared between the two stocks.

Flowserve Corporation Company Profile

Flowserve Corporation is a manufacturer and aftermarket service provider of flow control systems. The Company’s segments include Engineered Product Division, Industrial Product Division and Flow Control Division. Its geographic segments include North America, Europe, Asia Pacific, Middle East and Africa, and Latin America. It develops and manufactures precision-engineered flow control equipment integral to the movement, control and protection of the flow of materials in its customer’s critical processes. Its product portfolio of pumps, valves, seals, automation and aftermarket services supports infrastructure industries, including oil and gas, chemical, power generation and water management. It offers aftermarket equipment services, such as installation, diagnostics, repair and retrofitting through manufacturing platform and network of Quick Response Centers. Its products include oil and gas, general industries, chemical, power generation and water management.

Xylem Company Profile

Xylem Inc. is a water technology company. The Company designs, manufactures and services engineered solutions across a range of critical applications. It is an equipment and service provider for water and wastewater applications with a portfolio of products and services addressing the cycle of water, from collection, distribution and use to the return of water to the environment. It has three business segments, which include Water Infrastructure, Applied Water and Sensus. Water Infrastructure focuses on the transportation, treatment and testing of water, offering a range of products, including water and wastewater pumps, and controls and systems. Applied Water serves the uses of water and focuses on the residential, commercial, industrial and agricultural markets. The Sensus segment’s products include metering, networked communications, measurement and control technologies, software and services, including cloud-based analytics, remote monitoring and data management.

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