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Illinois Tool Works Inc Stock Buy Recommendation Reiterated (ITW)

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, solid stock price performance and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Highlights from the ratings report include:

  • 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.
  • 39.50% 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.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 25.72% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ITW should continue to move higher despite the fact that it has already enjoyed a very nice gain 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 259.11%.

Illinois Tool Works Inc. manufactures and sells a range of industrial products and equipment worldwide. Illinois Tool Works has a market cap of $30.8 billion and is part of the industrial goods sector and industrial industry. The company has a P/E ratio of 13.00, below the S&P 500 P/E ratio of 18.00. Shares are up 10.4% year to date as of the close of trading on Monday.

You can view the full Illinois Tool Works Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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