Intrinsic value of Illinois Tool Works - ITW

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$134.87

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$134.87

 
Intrinsic value

$91.16

 
Up/down potential

-32%

 
Rating

sell

 
Value-price divergence* premium content

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ITW stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 46.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  1.45
  3.80
  3.92
  4.03
  4.13
  4.21
  4.29
  4.36
  4.43
  4.48
  4.54
  4.58
  4.62
  4.66
  4.69
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
Revenue, $m
  13,599
  14,116
  14,669
  15,260
  15,889
  16,559
  17,269
  18,023
  18,820
  19,664
  20,556
  21,498
  22,492
  23,540
  24,645
  25,810
  27,037
  28,328
  29,688
  31,119
  32,625
  34,208
  35,874
  37,625
  39,466
  41,402
  43,436
  45,574
  47,821
  50,182
  52,663
Variable operating expenses, $m
 
  11,078
  11,494
  11,939
  12,412
  12,916
  13,451
  14,018
  14,618
  15,253
  15,924
  16,177
  16,925
  17,714
  18,545
  19,422
  20,345
  21,317
  22,340
  23,417
  24,549
  25,741
  26,994
  28,312
  29,698
  31,154
  32,685
  34,294
  35,985
  37,761
  39,628
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  10,535
  11,078
  11,494
  11,939
  12,412
  12,916
  13,451
  14,018
  14,618
  15,253
  15,924
  16,177
  16,925
  17,714
  18,545
  19,422
  20,345
  21,317
  22,340
  23,417
  24,549
  25,741
  26,994
  28,312
  29,698
  31,154
  32,685
  34,294
  35,985
  37,761
  39,628
Operating income, $m
  3,064
  3,038
  3,175
  3,321
  3,477
  3,643
  3,819
  4,005
  4,203
  4,411
  4,632
  5,321
  5,567
  5,827
  6,100
  6,388
  6,692
  7,012
  7,348
  7,703
  8,075
  8,467
  8,879
  9,313
  9,769
  10,248
  10,751
  11,280
  11,837
  12,421
  13,035
EBITDA, $m
  3,534
  3,694
  3,839
  3,994
  4,159
  4,334
  4,520
  4,717
  4,926
  5,146
  5,380
  5,626
  5,886
  6,161
  6,450
  6,755
  7,076
  7,414
  7,770
  8,144
  8,538
  8,953
  9,389
  9,847
  10,329
  10,835
  11,368
  11,927
  12,516
  13,133
  13,783
Interest expense (income), $m
  212
  251
  265
  280
  295
  312
  330
  349
  369
  390
  412
  436
  461
  487
  515
  544
  575
  608
  642
  678
  716
  756
  798
  842
  888
  937
  989
  1,042
  1,099
  1,159
  1,221
Earnings before tax, $m
  2,908
  2,787
  2,910
  3,042
  3,182
  3,331
  3,489
  3,656
  3,834
  4,022
  4,220
  4,885
  5,106
  5,339
  5,585
  5,844
  6,117
  6,404
  6,706
  7,025
  7,359
  7,711
  8,082
  8,471
  8,880
  9,310
  9,763
  10,238
  10,737
  11,262
  11,814
Tax expense, $m
  873
  752
  786
  821
  859
  899
  942
  987
  1,035
  1,086
  1,139
  1,319
  1,379
  1,442
  1,508
  1,578
  1,652
  1,729
  1,811
  1,897
  1,987
  2,082
  2,182
  2,287
  2,398
  2,514
  2,636
  2,764
  2,899
  3,041
  3,190
Net income, $m
  2,035
  2,034
  2,124
  2,220
  2,323
  2,431
  2,547
  2,669
  2,799
  2,936
  3,081
  3,566
  3,728
  3,898
  4,077
  4,266
  4,465
  4,675
  4,896
  5,128
  5,372
  5,629
  5,900
  6,184
  6,483
  6,797
  7,127
  7,474
  7,838
  8,221
  8,624

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,472
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  15,201
  13,217
  13,735
  14,288
  14,878
  15,505
  16,170
  16,875
  17,622
  18,412
  19,247
  20,129
  21,060
  22,041
  23,076
  24,167
  25,315
  26,525
  27,798
  29,138
  30,547
  32,030
  33,590
  35,229
  36,953
  38,766
  40,671
  42,673
  44,777
  46,987
  49,310
Adjusted assets (=assets-cash), $m
  12,729
  13,217
  13,735
  14,288
  14,878
  15,505
  16,170
  16,875
  17,622
  18,412
  19,247
  20,129
  21,060
  22,041
  23,076
  24,167
  25,315
  26,525
  27,798
  29,138
  30,547
  32,030
  33,590
  35,229
  36,953
  38,766
  40,671
  42,673
  44,777
  46,987
  49,310
Revenue / Adjusted assets
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
Average production assets, $m
  3,126
  3,247
  3,374
  3,510
  3,655
  3,809
  3,972
  4,145
  4,329
  4,523
  4,728
  4,945
  5,173
  5,414
  5,668
  5,936
  6,218
  6,516
  6,828
  7,157
  7,504
  7,868
  8,251
  8,654
  9,077
  9,522
  9,990
  10,482
  10,999
  11,542
  12,113
Working capital, $m
  3,363
  1,595
  1,658
  1,724
  1,796
  1,871
  1,951
  2,037
  2,127
  2,222
  2,323
  2,429
  2,542
  2,660
  2,785
  2,917
  3,055
  3,201
  3,355
  3,516
  3,687
  3,866
  4,054
  4,252
  4,460
  4,678
  4,908
  5,150
  5,404
  5,671
  5,951
Total debt, $m
  7,829
  7,575
  7,994
  8,441
  8,918
  9,425
  9,963
  10,534
  11,138
  11,778
  12,453
  13,166
  13,919
  14,713
  15,551
  16,433
  17,362
  18,341
  19,371
  20,454
  21,595
  22,794
  24,056
  25,383
  26,777
  28,244
  29,785
  31,404
  33,106
  34,895
  36,774
Total liabilities, $m
  10,947
  10,693
  11,112
  11,559
  12,036
  12,543
  13,081
  13,652
  14,256
  14,896
  15,571
  16,284
  17,037
  17,831
  18,669
  19,551
  20,480
  21,459
  22,489
  23,572
  24,713
  25,912
  27,174
  28,501
  29,895
  31,362
  32,903
  34,522
  36,224
  38,013
  39,892
Total equity, $m
  4,254
  2,524
  2,623
  2,729
  2,842
  2,961
  3,088
  3,223
  3,366
  3,517
  3,676
  3,845
  4,022
  4,210
  4,408
  4,616
  4,835
  5,066
  5,309
  5,565
  5,835
  6,118
  6,416
  6,729
  7,058
  7,404
  7,768
  8,150
  8,552
  8,975
  9,418
Total liabilities and equity, $m
  15,201
  13,217
  13,735
  14,288
  14,878
  15,504
  16,169
  16,875
  17,622
  18,413
  19,247
  20,129
  21,059
  22,041
  23,077
  24,167
  25,315
  26,525
  27,798
  29,137
  30,548
  32,030
  33,590
  35,230
  36,953
  38,766
  40,671
  42,672
  44,776
  46,988
  49,310
Debt-to-equity ratio
  1.840
  3.000
  3.050
  3.090
  3.140
  3.180
  3.230
  3.270
  3.310
  3.350
  3.390
  3.420
  3.460
  3.490
  3.530
  3.560
  3.590
  3.620
  3.650
  3.680
  3.700
  3.730
  3.750
  3.770
  3.790
  3.810
  3.830
  3.850
  3.870
  3.890
  3.900
Adjusted equity ratio
  0.140
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191
  0.191

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,035
  2,034
  2,124
  2,220
  2,323
  2,431
  2,547
  2,669
  2,799
  2,936
  3,081
  3,566
  3,728
  3,898
  4,077
  4,266
  4,465
  4,675
  4,896
  5,128
  5,372
  5,629
  5,900
  6,184
  6,483
  6,797
  7,127
  7,474
  7,838
  8,221
  8,624
Depreciation, amort., depletion, $m
  470
  656
  664
  672
  681
  691
  701
  712
  723
  735
  748
  305
  319
  334
  350
  366
  384
  402
  421
  442
  463
  486
  509
  534
  560
  588
  617
  647
  679
  712
  748
Funds from operations, $m
  2,339
  2,691
  2,788
  2,893
  3,004
  3,122
  3,248
  3,381
  3,522
  3,671
  3,828
  3,871
  4,047
  4,232
  4,427
  4,633
  4,849
  5,077
  5,317
  5,570
  5,835
  6,115
  6,409
  6,718
  7,043
  7,384
  7,743
  8,121
  8,517
  8,934
  9,372
Change in working capital, $m
  37
  58
  63
  67
  71
  76
  80
  85
  90
  95
  101
  106
  112
  118
  125
  132
  139
  146
  154
  162
  170
  179
  188
  198
  208
  219
  230
  242
  254
  267
  280
Cash from operations, $m
  2,302
  2,621
  2,726
  2,826
  2,933
  3,047
  3,168
  3,296
  3,432
  3,575
  3,727
  3,765
  3,935
  4,114
  4,302
  4,501
  4,711
  4,931
  5,164
  5,408
  5,665
  5,936
  6,221
  6,520
  6,835
  7,166
  7,514
  7,879
  8,263
  8,667
  9,091
Maintenance CAPEX, $m
  0
  -193
  -200
  -208
  -217
  -226
  -235
  -245
  -256
  -267
  -279
  -292
  -305
  -319
  -334
  -350
  -366
  -384
  -402
  -421
  -442
  -463
  -486
  -509
  -534
  -560
  -588
  -617
  -647
  -679
  -712
New CAPEX, $m
  -273
  -121
  -127
  -136
  -145
  -154
  -163
  -173
  -183
  -194
  -205
  -217
  -229
  -241
  -254
  -268
  -282
  -297
  -313
  -329
  -346
  -364
  -383
  -403
  -423
  -445
  -468
  -492
  -517
  -543
  -571
Cash from investing activities, $m
  -532
  -314
  -327
  -344
  -362
  -380
  -398
  -418
  -439
  -461
  -484
  -509
  -534
  -560
  -588
  -618
  -648
  -681
  -715
  -750
  -788
  -827
  -869
  -912
  -957
  -1,005
  -1,056
  -1,109
  -1,164
  -1,222
  -1,283
Free cash flow, $m
  1,770
  2,308
  2,398
  2,482
  2,571
  2,667
  2,769
  2,877
  2,992
  3,114
  3,243
  3,257
  3,401
  3,553
  3,714
  3,883
  4,062
  4,250
  4,449
  4,657
  4,877
  5,109
  5,352
  5,608
  5,877
  6,160
  6,458
  6,771
  7,100
  7,445
  7,808
Issuance/(repayment) of debt, $m
  465
  398
  419
  448
  477
  507
  538
  571
  604
  639
  676
  713
  753
  794
  837
  882
  929
  978
  1,030
  1,084
  1,140
  1,200
  1,262
  1,327
  1,395
  1,466
  1,541
  1,620
  1,702
  1,788
  1,879
Issuance/(repurchase) of shares, $m
  -1,916
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,434
  398
  419
  448
  477
  507
  538
  571
  604
  639
  676
  713
  753
  794
  837
  882
  929
  978
  1,030
  1,084
  1,140
  1,200
  1,262
  1,327
  1,395
  1,466
  1,541
  1,620
  1,702
  1,788
  1,879
Total cash flow (excl. dividends), $m
  203
  2,705
  2,817
  2,929
  3,048
  3,174
  3,307
  3,448
  3,597
  3,753
  3,919
  3,970
  4,154
  4,347
  4,551
  4,765
  4,991
  5,229
  5,479
  5,741
  6,018
  6,308
  6,614
  6,935
  7,272
  7,626
  7,999
  8,390
  8,802
  9,234
  9,687
Retained Cash Flow (-), $m
  970
  -90
  -99
  -106
  -113
  -120
  -127
  -135
  -143
  -151
  -159
  -168
  -178
  -187
  -198
  -208
  -219
  -231
  -243
  -256
  -269
  -283
  -298
  -313
  -329
  -346
  -364
  -382
  -402
  -422
  -444
Prev. year cash balance distribution, $m
 
  1,820
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  4,435
  2,718
  2,824
  2,936
  3,054
  3,180
  3,313
  3,454
  3,602
  3,759
  3,802
  3,976
  4,160
  4,353
  4,557
  4,772
  4,998
  5,235
  5,485
  5,748
  6,025
  6,316
  6,621
  6,943
  7,280
  7,635
  8,008
  8,400
  8,811
  9,244
Discount rate, %
 
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
 
  4,184
  2,406
  2,330
  2,244
  2,148
  2,043
  1,928
  1,806
  1,677
  1,544
  1,363
  1,231
  1,100
  971
  846
  728
  617
  515
  423
  341
  271
  211
  161
  120
  87
  62
  43
  29
  19
  12
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Illinois Tool Works Inc. manufactures and sells industrial products and equipment worldwide. It operates through seven segments: Automotive OEM; Test & Measurement and Electronics; Food Equipment; Polymers & Fluids; Welding; Construction Products; and Specialty Products. The Automotive OEM segment produces components and fasteners for automotive-related applications. The Test & Measurement and Electronics segment provides equipment, consumables, and related software for testing and measuring of materials and structures. This segment also offers equipment and consumables used in the production of electronic subassemblies and microelectronics. The Food Equipment segment provides commercial food equipment and related services. The Polymers & Fluids segment produces adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance. The Welding segment produces arc welding equipment, consumables, and accessories for various industrial and commercial applications. The Construction Products segment produces engineered fastening systems and solutions. The Specialty Products segment provides beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners. The company distributes its products directly to industrial manufacturers, as well as through independent distributors. Illinois Tool Works Inc. was founded in 1912 and is headquartered in Glenview, Illinois.

FINANCIAL RATIOS  of  Illinois Tool Works (ITW)

Valuation Ratios
P/E Ratio 23
Price to Sales 3.4
Price to Book 11
Price to Tangible Book
Price to Cash Flow 20.3
Price to Free Cash Flow 23.1
Growth Rates
Sales Growth Rate 1.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -3.9%
Cap. Spend. - 3 Yr. Gr. Rate -5.8%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 168.7%
Total Debt to Equity 184%
Interest Coverage 15
Management Effectiveness
Return On Assets 14.1%
Ret/ On Assets - 3 Yr. Avg. 14.3%
Return On Total Capital 16.5%
Ret/ On T. Cap. - 3 Yr. Avg. 16.7%
Return On Equity 42.9%
Return On Equity - 3 Yr. Avg. 36.7%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 41.9%
Gross Margin - 3 Yr. Avg. 41.1%
EBITDA Margin 26.4%
EBITDA Margin - 3 Yr. Avg. 25.2%
Operating Margin 22.5%
Oper. Margin - 3 Yr. Avg. 21.3%
Pre-Tax Margin 21.4%
Pre-Tax Margin - 3 Yr. Avg. 20.1%
Net Profit Margin 15%
Net Profit Margin - 3 Yr. Avg. 16.5%
Effective Tax Rate 30%
Eff/ Tax Rate - 3 Yr. Avg. 30.1%
Payout Ratio 40.3%

ITW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ITW stock intrinsic value calculation we used $13599 million for the last fiscal year's total revenue generated by Illinois Tool Works. The default revenue input number comes from 2016 income statement of Illinois Tool Works. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ITW stock valuation model: a) initial revenue growth rate of 3.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6%, whose default value for ITW is calculated based on our internal credit rating of Illinois Tool Works, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Illinois Tool Works.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ITW stock the variable cost ratio is equal to 78.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ITW stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Illinois Tool Works.

Corporate tax rate of 27% is the nominal tax rate for Illinois Tool Works. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ITW stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ITW are equal to 23%.

Life of production assets of 16.2 years is the average useful life of capital assets used in Illinois Tool Works operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ITW is equal to 11.3%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $4254 million for Illinois Tool Works - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 345.286 million for Illinois Tool Works is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Illinois Tool Works at the current share price and the inputted number of shares is $46.6 billion.


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Stock chart of ITW Financial statements of ITW
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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