Stock Analysis

Is Now The Time To Put Illinois Tool Works (NYSE:ITW) On Your Watchlist?

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The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Illinois Tool Works (NYSE:ITW). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for Illinois Tool Works

How Quickly Is Illinois Tool Works Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Illinois Tool Works managed to grow EPS by 8.3% per year, over three years. That's a pretty good rate, if the company can sustain it.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Illinois Tool Works remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 10% to US$16b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

NYSE:ITW Earnings and Revenue History February 5th 2023

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Illinois Tool Works' future EPS 100% free.

Are Illinois Tool Works Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

For the sake of balance, it should be noted that Illinois Tool Works insiders sold US$205k worth of shares last year. But that doesn't beat the large US$308k share acquisition by Independent Director David H. Smith. And that's a reason to be optimistic.

The good news, alongside the insider buying, for Illinois Tool Works bulls is that insiders (collectively) have a meaningful investment in the stock. We note that their impressive stake in the company is worth US$225m. This comes in at 0.3% of shares in the company, which is a fair amount of a business of this size. This still shows shareholders there is a degree of alignment between management and themselves.

Does Illinois Tool Works Deserve A Spot On Your Watchlist?

One positive for Illinois Tool Works is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for your watchlist - and arguably a research priority. Even so, be aware that Illinois Tool Works is showing 1 warning sign in our investment analysis , you should know about...

The good news is that Illinois Tool Works is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

What are the risks and opportunities for Illinois Tool Works?

Illinois Tool Works Inc. manufactures and sells industrial products and equipment worldwide.

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  • Earnings are forecast to grow 3.95% per year

  • Earnings grew by 12.6% over the past year


  • Has a high level of debt

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