Critical Analysis: Xylem (NYSE:XYL) & Republic Services (NYSE:RSG)

Republic Services (NYSE:RSG) and Xylem (NYSE:XYL) are both large-cap business services companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, profitability, analyst recommendations, valuation, institutional ownership, dividends and risk.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Republic Services and Xylem, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Republic Services	0	9	14	0	2.61
Xylem	0	4	9	0	2.69

Republic Services currently has a consensus price target of $245.62, indicating a potential upside of 11.93%. Xylem has a consensus price target of $158.08, indicating a potential upside of 22.94%. Given Xylem’s stronger consensus rating and higher probable upside, analysts clearly believe Xylem is more favorable than Republic Services.

Risk and Volatility

Republic Services has a beta of 0.54, indicating that its share price is 46% less volatile than the S&P 500. Comparatively, Xylem has a beta of 1.17, indicating that its share price is 17% more volatile than the S&P 500.

Earnings & Valuation

This table compares Republic Services and Xylem”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Republic Services	$16.59 billion	4.08	$2.04 billion	$6.85	32.04
Xylem	$9.04 billion	3.47	$957.00 million	$3.92	32.80

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Republic Services	12.90%	18.44%	6.51%
Xylem	10.59%	11.11%	7.22%

Dividends

Republic Services pays an annual dividend of $2.50 per share and has a dividend yield of 1.1%. Xylem pays an annual dividend of $1.60 per share and has a dividend yield of 1.2%. Republic Services pays out 36.5% of its earnings in the form of a dividend. Xylem pays out 40.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Republic Services has raised its dividend for 22 consecutive years and Xylem has raised its dividend for 2 consecutive years.

Insider & Institutional Ownership

57.7% of Republic Services shares are held by institutional investors. Comparatively, 88.0% of Xylem shares are held by institutional investors. 0.1% of Republic Services shares are held by company insiders. Comparatively, 0.3% of Xylem shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Summary

Republic Services beats Xylem on 9 of the 17 factors compared between the two stocks.

About Republic Services

Republic Services, Inc., together with its subsidiaries, offers environmental services in the United States and Canada. It is involved in the collection and processing of recyclable, solid waste, and industrial waste materials; transportation and disposal of non-hazardous and hazardous waste streams; and other environmental solutions. Its residential collection services include curbside collection of material for transport to transfer stations, landfills, recycling centers, and organics processing facilities; supply of recycling and waste containers; and renting of compactors. The company also engages in the processing and sale of old corrugated containers, old newsprint, aluminum, glass, and other materials; and provision of landfill services. It serves small-container, large-container, and residential customers. The company was incorporated in 1996 and is based in Phoenix, Arizona.

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.