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Carlin, 25, has secured her place in Team GB's squad and claimed a silver medal in the 800m freestyle at the European Championships on Thursday.
Commonwealth champion Carlin missed the 2012 Olympics because of illness.
"Europeans, Commonwealths, Worlds - she's done all of them absolutely right," Davies told BBC Radio Wales.
"She's an incredibly hard worker. She worries a little bit too much and needs to have more confidence in herself."
Davies believes Rebecca Adlington, who won two gold medals at the 2008 Beijing Olympics, can serve as both a motivation and a warning for Carlin.
"The amount of work Jazz puts in is absolutely second to none," said Davies. "She's not very far from Rebecca's British record, which I think is very firmly in her sights.
"I watched Rebecca melt down at the Olympics through nervous energy and there was so much expectation on her shoulders in London after the success she had in Beijing so that's what Jazz has got to be most careful of."
Davies, who won silver at the 1980 Olympic Games in Moscow, was also pleased to see Chloe Tutton break through, after the 19-year-old Welsh swimmer qualified for Rio.
Tutton claimed bronze in the 100m breaststroke at the European Championships on Wednesday, having won 200m breaststroke gold at the British Championships.
"British men's breaststroke is amazing but women's breaststroke has not been," Davies said.
"We've got some youngsters in the squad who are going to use these Games as experience.
"I don't think we're expecting Chloe to go there to win medals, but she could make a final which would probably be her target and we'd love to see her again in four years' time."
Wales' Jazz Carlin needs to believe in herself if she is to succeed in Rio this summer, says former Olympic silver medallist Sharron Davies.