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Firm Analysis

In: Business and Management

Submitted By profacct2016
Words 936
Pages 4
Finance 4310-002

Illinois Tool Works Inc. (ITW)

Overview

The following was obtained from the Morningstar Investment Research database provided by the University of North Texas Willis Library, September 22, 2013:

Profile:
Illinois Tool Works manufactures a diversified range of industrial products and equipment. ITW produces everything from plastic beverage rings to commercial dishwashers to automotive seat heaters. It operates a decentralized model, with the number of divisions dropping to 100 (from 800) after its business structure simplification initiative is complete. The revenue split in 2012 was 50% North America, 30% Europe, 20% Asia Pacific/other.

Firm/Industry Comparisons | | ITW | Industry | Market Data | | | Beta | 1.24 | 1 | P/E | 14.4 | 18.9 | Price/CF | 15.6 | 15.3 | Dividend Yield | 2 | 2 | Revenue Growth | | | 3 Yr. Revenue Growth | 8.9 | 3.6 | Debt Ratios | | | Debt/Equity | .50 | 1.03 | Debt/Assets | .26 | .42 | Total Liab./Total Assets* | .45 | | LT Liab./Total Assets* | .30 | | *ITW only | | |

| NPM | TAT | EM | Dupont ROE | Direct ROE | ITW | 13.4% | .91 | 1.92 | 23.41 | 22.9 | Industry | 8.7% | .47 | 2.45 | 10.02 | 15.5 |

Analysis
Market Data
Beta: The beta for Illinois Tool Works (ITW) is currently at 1.24. The beta reflects a slightly higher systematic risk for ITW than the market average. As a result of higher risk, ITW returns and losses will be greater than the market average. Favorability is determined by investment strategy.
P/E Ratio: The price per earnings ratio of ITW is currently at 14.4%, which is unfavorable. As compared to the industry average P/E ratio of 18.9%, investors are skeptical about the future growth of ITW.
Price/CF: The price per cash flows of ITW is currently at 15.6%, which is favorable. The Price/CF indicates that ITW’s stock is above the...

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