Is Xylem, Inc. overvalued or undervalued?

As of 17 October 2025, the valuation grade for Xylem, Inc. has moved from fair to expensive, indicating a shift towards overvaluation. The company appears overvalued based on several key metrics, including a P/E ratio of 35, an EV to EBITDA of 20.21, and a Price to Book Value of 3.03. In comparison to peers, Xylem's P/E ratio is lower than Ingersoll Rand, Inc. at 52.55, but higher than Dover Corp. at 43.35, suggesting that while it is relatively less expensive than some, it still commands a premium in the market.
The company's recent stock performance shows a YTD return of 25.76%, which outpaces the S&P 500's 13.30% return, but over longer periods, such as 3Y and 5Y, Xylem significantly lags behind the benchmark, with returns of 61.14% and 59.43% respectively compared to the S&P 500's 81.19% and 91.29%. This divergence in performance reinforces the notion that Xylem may be overvalued in the current market environment.