Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.NEW YORK (TheStreet) -- Illinois Tool Works (NYSE:ITW) has been reiterated by TheStreet Ratings as a buy with a ratings score of A-. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins, increase in stock price during the past year and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- The current debt-to-equity ratio, 0.49, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, ITW has a quick ratio of 1.95, which demonstrates the ability of the company to cover short-term liquidity needs.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Machinery industry and the overall market, ILLINOIS TOOL WORKS's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- 35.90% is the gross profit margin for ILLINOIS TOOL WORKS which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 8.83% is above that of the industry average.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- Net operating cash flow has increased to $366.00 million or 13.31% when compared to the same quarter last year. Despite an increase in cash flow of 13.31%, ILLINOIS TOOL WORKS is still growing at a significantly lower rate than the industry average of 1321.29%.
--Written by a member of TheStreet Ratings Staff.Exclusive Offer: Jim Cramer's 'go-to' small/mid-cap guru Bryan Ashenberg only buys stocks he thinks could return 50-100%. See his top picks for 14-days FREE.
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