Today we're going to take a look at the well-established Illinois Tool Works Inc. (NYSE:ITW). The company's stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$227 at one point, and dropping to the lows of US$196. 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$207 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.
What is Illinois Tool Works worth?
Great news for investors – Illinois Tool Works is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is $279.74, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, Illinois Tool Works’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Illinois Tool Works?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 24% over the next couple of years, the future seems bright 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? Since ITW is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on ITW for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ITW. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that Illinois Tool Works has 2 warning signs and it would be unwise to ignore these.
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.