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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Illinois Tool Works (NYSE:ITW). While that doesn’t make the shares worth buying at any price, you can’t deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
How Fast Is Illinois Tool Works Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Illinois Tool Works has grown EPS by 13% per year. That’s a pretty good rate, if the company can sustain it.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company’s growth. It seems Illinois Tool Works is pretty stable, since revenue and EBIT margins are pretty flat year on year. That’s not bad, but it doesn’t point to ongoing future growth, either.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
You don’t drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Illinois Tool Works’s future profits.
Are Illinois Tool Works Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don’t always get it right.
The first bit of good news is that no Illinois Tool Works insiders reported share sales in the last twelve months. But the really good news is that Independent Director Richard Lenny spent US$250k buying stock stock, at an average price of around US$140.85. Big buys like that give me a sense of opportunity; actions speak louder than words.
The good news, alongside the insider buying, for Illinois Tool Works bulls is that insiders (collectively) have a meaningful investment in the stock. Notably, they have an enormous stake in the company, worth US$496m. This suggests to me that leadership will be very mindful of shareholders’ interests when making decisions!
Should You Add Illinois Tool Works To Your Watchlist?
As I already mentioned, Illinois Tool Works is a growing business, which is what I like to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for my watchlist – and arguably a research priority. Once you’ve identified a business you like, the next step is to consider what you think it’s worth. And right now is your chance to view our exclusive discounted cashflow valuation of Illinois Tool Works. You might benefit from giving it a glance today.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Illinois Tool Works, you’ll probably love this free list of growing companies that insiders are buying.Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.