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 increase in stock price during the past year, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, notable return on equity and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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- 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 net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Machinery industry. The net income increased by 121.4% when compared to the same quarter one year prior, rising from $442.20 million to $979.00 million.
- The current debt-to-equity ratio, 0.48, 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 2.08, which demonstrates the ability of the company to cover short-term liquidity needs.
- 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. 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.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 12.0%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
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