What Does Illinois Tool Works Inc.'s (NYSE:ITW) Share Price Indicate?

Illinois Tool Works Inc. (NYSE:ITW) saw significant share price movement during recent months on the NYSE, rising to highs of US$263 and falling to the lows of US$230. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Illinois Tool Works' current trading price of US$233 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Illinois Tool Works’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Illinois Tool Works

What's The Opportunity In Illinois Tool Works?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 7.2% below my intrinsic value, which means if you buy Illinois Tool Works today, you’d be paying a fair price for it. And if you believe the company’s true value is $251.02, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Illinois Tool Works’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Illinois Tool Works look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by a double-digit 12% over the next couple of years, the outlook is positive for Illinois Tool Works. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? ITW’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on ITW, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Illinois Tool Works, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 1 warning sign for Illinois Tool Works you should know about.

If you are no longer interested in Illinois Tool Works, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.