Xylem (XYL) and Graco (GGG) Financial Analysis

Xylem (NYSE: XYL) and Graco (NYSE:GGG) are both mid-cap industrial products companies, but which is the better stock? We will compare the two businesses based on the strength of their risk, valuation, earnings, profitability, dividends, analyst recommendations and institutional ownership.

Dividends

Xylem pays an annual dividend of $0.72 per share and has a dividend yield of 1.2%. Graco pays an annual dividend of $1.44 per share and has a dividend yield of 1.3%. Xylem pays out 45.3% of its earnings in the form of a dividend. Graco pays out 92.9% 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 raised its dividend for 12 consecutive years and Graco has raised its dividend for 4 consecutive years.

Analyst Recommendations

This is a summary of current recommendations and price targets for Xylem and Graco, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Xylem 0 4 10 0 2.71
Graco 0 4 0 0 2.00

Xylem currently has a consensus price target of $58.75, indicating a potential downside of 0.63%. Graco has a consensus price target of $101.00, indicating a potential downside of 10.35%. Given Xylem’s stronger consensus rating and higher possible upside, research analysts plainly believe Xylem is more favorable than Graco.

Risk and Volatility

Xylem has a beta of 1.18, meaning that its stock price is 18% more volatile than the S&P 500. Comparatively, Graco has a beta of 1.25, meaning that its stock price is 25% more volatile than the S&P 500.

Insider and Institutional Ownership

86.4% of Xylem shares are held by institutional investors. Comparatively, 90.3% of Graco shares are held by institutional investors. 0.8% of Xylem shares are held by company insiders. Comparatively, 5.7% of Graco shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Profitability

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

Net Margins Return on Equity Return on Assets
Xylem 7.08% 16.02% 5.94%
Graco 6.50% 40.21% 18.93%

Valuation & Earnings

This table compares Xylem and Graco’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Xylem $4.23 billion 2.51 $723.00 million $1.59 37.18
Graco $1.40 billion 4.51 $397.35 million $1.55 72.68

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

Summary

Xylem beats Graco on 10 of the 17 factors compared between the two stocks.

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.

Graco Company Profile

Graco Inc. designs, manufactures and markets systems and equipment used to move, measure, control, dispense and spray fluid and powder materials. The Company specializes in equipment for applications that involve materials with viscosities, materials with abrasive or corrosive properties, and multiple-component materials that require ratio control. The Company operates through three segments: Industrial, Process and Contractor. The Industrial segment markets equipment and pre-engineered packages for moving and applying paints, coatings, sealants, adhesives and other fluids. The Process segment markets pumps, valves, meters and accessories to move and dispense chemicals, oil and natural gas, water, wastewater, petroleum, food, lubricants and other fluids. The Contractor segment markets sprayers for architectural coatings for painting, corrosion control, texture and line striping. Its equipment is used in the manufacturing, processing, construction and maintenance industries.

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