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 solid stock price performance, growth in earnings per share, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and increase in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. 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.
- ILLINOIS TOOL WORKS has improved earnings per share by 12.0% 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 two years. We feel that this trend should continue. During the past fiscal year, ILLINOIS TOOL WORKS increased its bottom line by earning $4.07 versus $2.89 in the prior year. This year, the market expects an improvement in earnings ($4.10 versus $4.07).
- 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 1.75, which demonstrates the ability of the company to cover short-term liquidity needs.
- 38.40% 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 11.64% is above that of the industry average.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Machinery industry average. The net income increased by 3.2% when compared to the same quarter one year prior, going from $507.62 million to $524.00 million.
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