NEW YORK (
-- Illinois Tool Works
) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, impressive record of earnings per share growth, robust revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins.
Highlights from the ratings report include:
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Machinery industry and the overall market on the basis of return on equity, ILLINOIS TOOL WORKS has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- ILLINOIS TOOL WORKS reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, ILLINOIS TOOL WORKS increased its bottom line by earning $3.03 versus $1.92 in the prior year. This year, the market expects an improvement in earnings ($3.80 versus $3.03).
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
- The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.25, which illustrates the ability to avoid short-term cash problems.
- ITW's revenue growth trails the industry average of 48.3%. Since the same quarter one year prior, revenues rose by 21.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
Illinois Tool Works Inc. manufactures a range of industrial products and equipment worldwide. The company has a P/E ratio of 18, equal to the average industrial industry P/E ratio and above the S&P 500 P/E ratio of 16.7. Illinois Tool Works has a market cap of $27.1 billion and is part of the
industry. Shares are up 8.1% year to date as of the close of trading on Tuesday.
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