MMarketMath

ITW

Slow growerQuality: High (78/100)1 red flag

Illinois Tool Works · Industrials · Industrial Machinery & Supplies & Components

$283.95

52w 238.82 – 303.16

20y monthly, adjusted

Mkt cap

$80.9B

P/E

26.2

P/FCF

29.7

FCF yield

3.4%

ROE

95.0%

Shldr yield

4.1%

div 2.2% + bb 1.9%

What today's price assumes

At $80.9B, the market is pricing in 13.1% annual free-cash-flow growth for the next decade (10% discount rate, 2.5% terminal growth). Over the last ten years, FCF actually grew 3.0% per year — the price asks for acceleration beyond the historical record.

Simple DCF per-share range: $135 · $135 · $168 (4% / base / optimistic growth). An estimate, not a target.

Adjust the assumptions yourself →

Historical multiple lens

At its own median P/OCF of 16.0× across 18 years, ITW would trade near $176/share (25th–75th percentile: $117–$230); it trades at 25.9× today.

Assumes the historical multiple regime persists — re-ratings can be permanent.

Growth record

Compound annual growth rates from as-filed 10-K data, split-adjusted

Rev 3y

+0.2%

Rev 5y

+5.0%

Rev 10y

+1.8%

EPS 5y

+9.6%

EPS 10y

+7.4%

FCF 5y

+1.0%

FCF 10y

+3.0%

Fundamentals

Fiscal 2007–2025, from SEC filings

Revenue

2007: $16.1B
2008: $17.1B
2009: $13.6B
2010: $15.4B
2011: $14.5B
2012: $14.8B
2013: $14.1B
2014: $14.5B
2015: $13.4B
2016: $13.6B
2017: $14.3B
2018: $14.8B
2019: $14.1B
2020: $12.6B
2021: $14.5B
2022: $15.9B
2023: $16.1B
2024: $15.9B
2025: $16.0B
$0$5.0B$10.0B$15.0B
07
11
15
19
23

Net income

2007: $1.9B
2008: $1.5B
2009: $972.7M
2010: $1.5B
2011: $2.1B
2012: $2.9B
2013: $1.7B
2014: $2.9B
2015: $1.9B
2016: $2.0B
2017: $1.7B
2018: $2.6B
2019: $2.5B
2020: $2.1B
2021: $2.7B
2022: $3.0B
2023: $3.0B
2024: $3.5B
2025: $3.1B
$0$1.0B$2.0B$3.0B
07
11
15
19
23

Free cash flow

2007: $2.1B
2008: $1.9B
2009: $1.9B
2010: $1.2B
2011: $1.6B
2012: $1.7B
2013: $2.2B
2014: $1.3B
2015: $2.0B
2016: $2.0B
2017: $2.1B
2018: $2.4B
2019: $2.7B
2020: $2.6B
2021: $2.3B
2022: $1.9B
2023: $3.1B
2024: $2.8B
2025: $2.7B
$0$1.0B$2.0B$3.0B
07
11
15
19
23

Diluted shares (lower is better)

2008: 521.2M
2009: 501.9M
2010: 503.4M
2011: 494.6M
2012: 473.2M
2013: 449.3M
2014: 404.6M
2015: 370.1M
2016: 357.1M
2017: 346.8M
2018: 337.1M
2019: 325.6M
2020: 318.3M
2021: 316.4M
2022: 310.7M
2023: 303.6M
2024: 297.8M
2025: 292.3M
0200.0M400.0M
07
11
15
19
23

Margins

10%15%20%07101316192225
Net marginFCF marginGross margin

Capital returned (dividends + buybacks)

2007: $2.3B
2008: $2.0B
2009: $619.7M
2010: $986.0M
2011: $1.6B
2012: $2.9B
2013: $2.6B
2014: $5.1B
2015: $2.7B
2016: $2.8B
2017: $1.9B
2018: $3.1B
2019: $2.8B
2020: $2.1B
2021: $2.5B
2022: $3.3B
2023: $3.1B
2024: $3.2B
2025: $3.3B
$0$2.0B$4.0B
07
11
15
19
23

Cash vs long-term debt

$2.5B$5.0B$7.5B07101316192225
CashLT debt

Quarterly

Discrete quarters from 10-Q filings; Q4 derived as fiscal year minus Q1–Q3. OCF is unwound from the year-to-date figures 10-Qs report. Compare to the same quarter a year ago — most businesses are seasonal.

Revenue by quarter

Q2'23: $4.1B
Q3'23: $4.0B
Q4'23: $4.0B
Q1'24: $4.0B
Q2'24: $4.0B
Q3'24: $4.0B
Q4'24: $3.9B
Q1'25: $3.8B
Q2'25: $4.1B
Q3'25: $4.1B
Q4'25: $4.1B
Q1'26: $4.0B
Q2'26: $4.3B
$0$2.0B$4.0B
23
24
24
25
26

Net income by quarter

Q2'23: $754.0M
Q3'23: $772.0M
Q4'23: $717.0M
Q1'24: $819.0M
Q2'24: $759.0M
Q3'24: $1.2B
Q4'24: $750.0M
Q1'25: $700.0M
Q2'25: $755.0M
Q3'25: $821.0M
Q4'25: $790.0M
Q1'26: $768.0M
Q2'26: $815.0M
$0$500.0M$1.0B
23
24
24
25
26
QuarterRevenueYoYNet incomeYoYEPSOCF
Q2'26$4.3B+6.1%$815.0M+7.9%2.84$723.0M
Q1'26$4.0B+4.6%$768.0M+9.7%2.66$623.0M
Q4'25 *$4.1B+4.1%$790.0M+5.3%2.72$963.0M
Q3'25$4.1B+2.3%$821.0M−29.2%2.81$1.0B
Q2'25$4.1B+0.6%$755.0M−0.5%2.58$550.0M
Q1'25$3.8B−3.4%$700.0M−14.5%2.38$592.0M
Q4'24 *$3.9B−1.3%$750.0M+4.6%2.53$1.1B
Q3'24$4.0B−1.6%$1.2B+50.3%3.91$891.0M
Q2'24$4.0B−1.2%$759.0M+0.7%2.54$687.0M
Q1'24$4.0B−1.1%$819.0M+14.7%2.73$589.0M
Q4'23 *$4.0B+0.3%$717.0M−20.9%2.38$1.0B
Q3'23$4.0B+0.5%$772.0M+6.2%2.55$982.0M
Q2'23$4.1B+1.6%$754.0M+2.2%2.48$790.0M

Track record

Compound annual growth by period. For debt and share count, negative is the good direction.

Series3y5y10y15y
Revenue+0.2%+5.0%+1.8%+0.3%
Operating cash flow+10.0%+2.2%+3.1%+5.1%
Free cash flow+11.8%+1.0%+3.0%+5.6%
EPS (diluted)+2.4%+9.6%+7.4%+8.7%
Equity+1.5%+0.3%−4.7%−7.0%
LT debt+2.7%−3.0%−0.3%+6.7%
Diluted shares−2.0%−1.7%−2.3%−3.6%
Stock price+7.2%+6.5%+11.7%+15.5%

$100, 3 years ago

$123vs $176 in SPY

7.2% vs 20.7%/yr

$100, 5 years ago

$137vs $181 in SPY

6.5% vs 12.6%/yr

$100, 10 years ago

$302vs $412 in SPY

11.7% vs 15.2%/yr

$100, 15 years ago

$869vs $813 in SPY

15.5% vs 15.0%/yr

The $1 test — market value created per $1 of earnings retained (Buffett's hurdle: at least $1)

Last 5 years

$2.95

$21.0B created / $7.1B retained

Last 10 years

$3.96

$49.4B created / $12.5B retained

Quality & capital discipline

Cash-based returns and how management deploys capital

Cash ROIC

31.5%

OCF ÷ (equity + debt)

OCF / EV yield

3.6%

MC vs 10× OCF

2.57

≤1 = priced under 10× OCF

Debt / FCF

2.5y

SBC / FCF

2.5%

Owner earnings

$2.6B

OCF − capex − SBC

OE yield

3.3%

Share count 5y

−3.3%

per year; negative = buybacks

Capital intensity

13.9%

net PP&E ÷ revenue

Sales efficiency

$0.13

new PP&E per $1 new revenue, 5y

Growth engine (5y): reinvested 4.5% of operating cash flow at an incremental return of 47.8% — an organically fundable growth rate of about 2.1% per year (growth ≈ reinvestment rate × incremental ROIC).

Checklist

17 of 26 checks pass · 65%. Checks with structurally missing inputs are excluded.

Growth & Consistency

3/7

  • Revenue growth

    5.0% · 5y CAGR ≥ 5%

    fail

  • EPS growth

    9.6% · 5y CAGR ≥ 5%

    pass

  • FCF growth

    1.0% · 5y CAGR ≥ 5%

    fail

  • Revenue rises consistently

    6 of 9 · up in ≥ 7 of last 10 years

    fail

  • FCF consistently positive

    10 of 10 · positive in ≥ 8 of last 10 years

    pass

  • Profitable every year

    10 of 10 · net income > 0 in ≥ 8 of last 10

    pass

  • Cash flow keeps up with sales

    2.2% vs 5.0% · OCF CAGR ≥ 0.9× revenue CAGR

    fail

Profitability

6/6

  • Net margin

    19.1% · ≥ 8%

    pass

  • Operating margin

    26.3% · ≥ 10%

    pass

  • Gross margin stable or rising

    — · no drop > 2 pts over 3y

    na

  • Return on equity

    95.0% · ≥ 12%

    pass

  • Cash ROIC

    31.5% · ≥ 12%

    pass

  • FCF margin

    16.9% · ≥ 5%

    pass

  • Earnings back their cash

    OCF $3.1B vs NI $3.1B · OCF ≥ net income (latest FY)

    pass

Balance Sheet

3/5

  • Debt payable from cash flow

    2.5y · LT debt ≤ 3× FCF

    pass

  • Cash cushion

    13% · cash ≥ 50% of LT debt

    fail

  • Leverage

    2.07 · LT debt ≤ 1.5× equity

    fail

  • Equity positive and compounding

    $3.2B · equity > 0 and grew over ~5y

    pass

  • Interest burden

    7% · interest ≤ 15% of operating income

    pass

Capital Allocation

3/4

  • Share count flat or shrinking

    -3.3% · ≤ +0.5%/yr over ~5y

    pass

  • Stock comp restrained

    3% · SBC ≤ 15% of FCF

    pass

  • Distributions funded by FCF

    121% · dividends + buybacks ≤ 100% of FCF

    fail

  • Repurchases are a habit

    10 of 10 · buybacks in ≥ 5 of last 10 years

    pass

Valuation Discipline

2/4

  • FCF yield

    3.4% · ≥ 3%

    pass

  • Earnings multiple

    26.2 · P/E ≤ 25

    fail

  • Price asks less than history delivered

    13.1% vs 3.0% · implied FCF growth ≤ historical FCF CAGR

    fail

  • Shareholder yield

    4.1% · dividends + buybacks ≥ 2% of market cap

    pass

Red flags

Mechanical checks — a flag is a question to investigate, not a verdict

Distributions exceed FCF

Dividends plus buybacks exceeded free cash flow in the latest fiscal year.

Financial data

As filed in 10-Ks; per-share figures split-adjusted. $ in millions.

FYRevenueGross profitOp incomeNet incomeEPSOCFCapExFCFDividendsBuybacksSBCCashLT debtEquityShares
202516,044—4,2163,06610.493,1264192,7071,7851,500698516,6833,226292
202415,898—4,2643,48811.713,2814372,8441,6951,500619486,3083,317298
202316,107—4,0402,9579.743,5394553,0841,6151,500691,0656,3393,013304
202215,932—3,7903,0349.772,3484121,9361,5421,750637086,1733,089311
202114,455—3,4772,6948.512,5572962,2611,4631,000531,5276,9093,626316
202012,574—2,8822,1096.632,8072362,5711,379706422,5647,7723,182318
201914,109—3,4022,5217.742,9953262,6691,3211,500411,9817,7543,030326
201814,768—3,5842,5637.602,8113642,4471,1242,000401,5046,0293,258337
201714,314—3,4851,6874.862,4022972,1059411,000363,0947,4784,589347
201613,599—3,0562,0355.702,3022732,0298212,000392,4727,1774,259357
201513,405—2,8671,8995.132,2992842,0157422,002413,0906,8965,228370
201414,484—2,8882,9467.281,6163611,2557114,346393,9905,9436,824405
201314,135—2,5141,6793.742,5283682,1605282,106373,6182,7939,709449
201214,791—2,4752,8706.062,0723821,6908652,020542,7794,58910,570473
201114,515—2,3612,0714.191,9563531,603680950561,1783,48810,034495
201015,416—2,2541,5032.991,4882881,200636350561,1862,5429,572503
200913,573—1,3839731.942,1682561,9126200521,3462,9158,818502
200817,100—2,5011,5192.912,2223621,8605991,391428611,2487,675521
200716,110—2,6281,8703.362,4843532,1315021,75830828———

Some concepts are structurally absent for certain industries (banks report no gross profit or capex). Missing ≠ zero.

Compare with peers →·10-K filings on EDGAR ↗