Xylem (NYSE:XYL) and Select Water Solutions (NYSE:WTTR) Critical Analysis

Xylem (NYSE:XYL) and Select Water Solutions (NYSE:WTTR) are both business services companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, risk, institutional ownership, dividends, analyst recommendations, valuation and earnings.

Dividends

Xylem pays an annual dividend of $1.72 per share and has a dividend yield of 1.6%. Select Water Solutions pays an annual dividend of $0.28 per share and has a dividend yield of 1.5%. Xylem pays out 42.8% of its earnings in the form of a dividend. Select Water Solutions pays out 133.3% 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 has increased its dividend for 2 consecutive years and Select Water Solutions has increased its dividend for 2 consecutive years. Xylem is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Xylem and Select Water Solutions’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Xylem	10.79%	11.26%	7.30%
Select Water Solutions	1.54%	2.21%	1.34%

Earnings and Valuation

This table compares Xylem and Select Water Solutions”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Xylem	$9.04 billion	2.90	$957.00 million	$4.02	27.44
Select Water Solutions	$1.41 billion	1.85	$21.22 million	$0.21	89.82

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

Volatility and Risk

Xylem has a beta of 1.04, suggesting that its share price is 4% more volatile than the S&P 500. Comparatively, Select Water Solutions has a beta of 1, suggesting that its share price has a similar volatility profile to the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Xylem and Select Water Solutions, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Xylem	0	6	7	0	2.54
Select Water Solutions	0	1	4	2	3.14

Xylem currently has a consensus target price of $152.77, indicating a potential upside of 38.50%. Select Water Solutions has a consensus target price of $22.40, indicating a potential upside of 18.75%. Given Xylem’s higher probable upside, research analysts plainly believe Xylem is more favorable than Select Water Solutions.

Insider and Institutional Ownership

88.0% of Xylem shares are held by institutional investors. Comparatively, 81.7% of Select Water Solutions shares are held by institutional investors. 0.3% of Xylem shares are held by insiders. Comparatively, 6.2% of Select Water Solutions shares are held by 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.

Summary

Xylem beats Select Water Solutions on 13 of the 17 factors compared between the two stocks.

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.

About Select Water Solutions

Select Water Solutions, Inc., together with its subsidiaries, provides water management and chemical solutions to the energy industry in the United States. The company operates through three segments: Water Services, Water Infrastructure, and Chemical Technologies. The Water Services segment provides water-related services, including water sourcing, water transfer, flowback and well testing, water containment, fluids hauling, water monitoring, and water network automation; technology solutions comprising hydrographic mapping, water volume and quality monitoring, remote pit and tank monitoring, leak detection, asset and fuel tracking, and automated-equipment services, as well as various surface rental equipment and workforce accommodation services. The Water Infrastructure segment engages in the recycling, gathering, transferring, and disposal of water through a network of permanent pipeline infrastructure, semi-permanent pipeline infrastructure, water recycling facilities, earthen pits, water sources, and SWDs; provides solids management services; and develops, builds, and operates semi-permanent and permanent infrastructure solutions. The Chemical Technologies segment provides technical solutions, products, and services related to chemical applications in the oil and gas industry. This segment develops, manufactures, and manages logistics; and provides chemicals used in hydraulic fracturing, stimulation, cementing, and well completions for pressure pumpers and oil and gas producers, as well as offers production chemical solutions for underperforming wells, corrosion and scale monitoring, chemical inventory management, well failure analysis, and lab services. It primarily serves oil and gas producers. The company was formerly known as Select Energy Services, Inc. and changed its name to Select Water Solutions, Inc. in May 2023. Select Water Solutions, Inc. was incorporated in 2016 and is headquartered in Houston, Texas.