ILLINOIS TOOL WORKS (ITW) Stock Fundamental Analysis
USA - New York Stock Exchange - NYSE:ITW - US4523081093 - Common Stock
258.26 USD
-1.43 (-0.55%)
258.26 USD
0 (0%)
ITW gets a fundamental rating of 6 out of 10. The analysis compared the fundamentals against 132 industry peers in the Machinery industry. ITW scores excellent on profitability, but there are some minor concerns on its financial health. ITW is quite expensive at the moment. It does show a decent growth rate. ITW also has an excellent dividend rating. These ratings would make ITW suitable for dividend investing!
1. Profitability
1.1 Basic Checks
- In the past year ITW was profitable.
- In the past year ITW had a positive cash flow from operations.
- ITW had positive earnings in each of the past 5 years.
- Each year in the past 5 years ITW had a positive operating cash flow.
1.2 Ratios
- Looking at the Return On Assets, with a value of 18.75%, ITW belongs to the top of the industry, outperforming 96.97% of the companies in the same industry.
- The Return On Equity of ITW (94.33%) is better than 100.00% of its industry peers.
- ITW has a Return On Invested Capital of 24.44%. This is amongst the best in the industry. ITW outperforms 97.73% of its industry peers.
- The Average Return On Invested Capital over the past 3 years for ITW is significantly above the industry average of 10.24%.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 18.75% | ||
| ROE | 94.33% | ||
| ROIC | 24.44% |
ROA(3y)20.63%
ROA(5y)18.43%
ROE(3y)100.54%
ROE(5y)88.45%
ROIC(3y)27.14%
ROIC(5y)23.98%
1.3 Margins
- Looking at the Profit Margin, with a value of 19.05%, ITW belongs to the top of the industry, outperforming 95.45% of the companies in the same industry.
- ITW's Profit Margin has improved in the last couple of years.
- ITW has a Operating Margin of 26.20%. This is amongst the best in the industry. ITW outperforms 98.48% of its industry peers.
- In the last couple of years the Operating Margin of ITW has grown nicely.
- ITW has a Gross Margin of 43.93%. This is amongst the best in the industry. ITW outperforms 83.33% of its industry peers.
- ITW's Gross Margin has been stable in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 26.2% | ||
| PM (TTM) | 19.05% | ||
| GM | 43.93% |
OM growth 3Y3.7%
OM growth 5Y2.15%
PM growth 3Y5.59%
PM growth 5Y4.19%
GM growth 3Y2.37%
GM growth 5Y1.08%
2. Health
2.1 Basic Checks
- With a Return on Invested Capital (ROIC) well above the Cost of Capital (WACC), ITW is creating value.
- ITW has less shares outstanding than it did 1 year ago.
- The number of shares outstanding for ITW has been reduced compared to 5 years ago.
- The debt/assets ratio for ITW has been reduced compared to a year ago.
2.2 Solvency
- An Altman-Z score of 8.06 indicates that ITW is not in any danger for bankruptcy at the moment.
- ITW has a Altman-Z score of 8.06. This is amongst the best in the industry. ITW outperforms 89.39% of its industry peers.
- The Debt to FCF ratio of ITW is 3.14, which is a good value as it means it would take ITW, 3.14 years of fcf income to pay off all of its debts.
- ITW has a Debt to FCF ratio of 3.14. This is in the better half of the industry: ITW outperforms 67.42% of its industry peers.
- ITW has a Debt/Equity ratio of 2.80. This is a high value indicating a heavy dependency on external financing.
- The Debt to Equity ratio of ITW (2.80) is worse than 86.36% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 2.8 | ||
| Debt/FCF | 3.14 | ||
| Altman-Z | 8.06 |
ROIC/WACC2.61
WACC9.35%
2.3 Liquidity
- A Current Ratio of 1.53 indicates that ITW should not have too much problems paying its short term obligations.
- ITW's Current ratio of 1.53 is on the low side compared to the rest of the industry. ITW is outperformed by 71.21% of its industry peers.
- ITW has a Quick Ratio of 1.11. This is a normal value and indicates that ITW is financially healthy and should not expect problems in meeting its short term obligations.
- ITW has a Quick ratio of 1.11. This is comparable to the rest of the industry: ITW outperforms 43.94% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.53 | ||
| Quick Ratio | 1.11 |
3. Growth
3.1 Past
- The Earnings Per Share has been growing slightly by 2.59% over the past year.
- Measured over the past 5 years, ITW shows a small growth in Earnings Per Share. The EPS has been growing by 5.34% on average per year.
- Looking at the last year, ITW shows a decrease in Revenue. The Revenue has decreased by -0.41% in the last year.
- ITW shows a small growth in Revenue. Measured over the last years, the Revenue has been growing by 2.42% yearly.
EPS 1Y (TTM)2.59%
EPS 3Y7.79%
EPS 5Y5.34%
EPS Q2Q%6.04%
Revenue 1Y (TTM)-0.41%
Revenue growth 3Y3.22%
Revenue growth 5Y2.42%
Sales Q2Q%2.34%
3.2 Future
- ITW is expected to show quite a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 9.58% yearly.
- Based on estimates for the next years, ITW will show a small growth in Revenue. The Revenue will grow by 3.85% on average per year.
EPS Next Y3.83%
EPS Next 2Y5.75%
EPS Next 3Y6.23%
EPS Next 5Y9.58%
Revenue Next Year0.33%
Revenue Next 2Y1.82%
Revenue Next 3Y2.34%
Revenue Next 5Y3.85%
3.3 Evolution
- The EPS growth rate is accelerating: in the next years the growth will be better than in the last years.
- The Revenue growth rate is accelerating: in the next years the growth will be better than in the last years.
4. Valuation
4.1 Price/Earnings Ratio
- Based on the Price/Earnings ratio of 25.05, the valuation of ITW can be described as expensive.
- Compared to the rest of the industry, the Price/Earnings ratio of ITW is on the same level as its industry peers.
- ITW is valuated at similar levels of the S&P average when we compare the Price/Earnings ratio to 27.21, which is the current average of the S&P500 Index.
- The Price/Forward Earnings ratio is 22.71, which indicates a rather expensive current valuation of ITW.
- Compared to the rest of the industry, the Price/Forward Earnings ratio of ITW is on the same level as its industry peers.
- Compared to an average S&P500 Price/Forward Earnings ratio of 25.98, ITW is valued at the same level.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 25.05 | ||
| Fwd PE | 22.71 |
4.2 Price Multiples
- ITW's Enterprise Value to EBITDA ratio is in line with the industry average.
- ITW's Price/Free Cash Flow is on the same level as the industry average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 26.33 | ||
| EV/EBITDA | 17.91 |
4.3 Compensation for Growth
- The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.
- ITW has an outstanding profitability rating, which may justify a higher PE ratio.
PEG (NY)6.53
PEG (5Y)4.69
EPS Next 2Y5.75%
EPS Next 3Y6.23%
5. Dividend
5.1 Amount
- With a Yearly Dividend Yield of 2.48%, ITW has a reasonable but not impressive dividend return.
- ITW's Dividend Yield is rather good when compared to the industry average which is at 1.01. ITW pays more dividend than 90.91% of the companies in the same industry.
- Compared to an average S&P500 Dividend Yield of 1.81, ITW pays a bit more dividend than the S&P500 average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.48% |
5.2 History
- On average, the dividend of ITW grows each year by 6.98%, which is quite nice.
- ITW has been paying a dividend for at least 10 years, so it has a reliable track record.
- ITW has not decreased its dividend for at least 10 years, so it has a reliable track record of non decreasing dividend.
Dividend Growth(5Y)6.98%
Div Incr Years29
Div Non Decr Years29
5.3 Sustainability
- 58.20% of the earnings are spent on dividend by ITW. This is a bit on the high side, but may be sustainable.
- ITW's earnings are growing more than its dividend. This makes the dividend growth sustainable.
DP58.2%
EPS Next 2Y5.75%
EPS Next 3Y6.23%
ILLINOIS TOOL WORKS / ITW FAQ
What is the ChartMill fundamental rating of ILLINOIS TOOL WORKS (ITW) stock?
ChartMill assigns a fundamental rating of 6 / 10 to ITW.
Can you provide the valuation status for ILLINOIS TOOL WORKS?
ChartMill assigns a valuation rating of 3 / 10 to ILLINOIS TOOL WORKS (ITW). This can be considered as Overvalued.
How profitable is ILLINOIS TOOL WORKS (ITW) stock?
ILLINOIS TOOL WORKS (ITW) has a profitability rating of 9 / 10.
What is the valuation of ILLINOIS TOOL WORKS based on its PE and PB ratios?
The Price/Earnings (PE) ratio for ILLINOIS TOOL WORKS (ITW) is 25.05 and the Price/Book (PB) ratio is 23.35.
Is the dividend of ILLINOIS TOOL WORKS sustainable?
The dividend rating of ILLINOIS TOOL WORKS (ITW) is 8 / 10 and the dividend payout ratio is 58.2%.