Let's talk about the popular Illinois Tool Works Inc. (NYSE:ITW). The company's shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$263 at one point, and dropping to the lows of US$225. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Illinois Tool Works' current trading price of US$225 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Illinois Tool Works's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Illinois Tool Works
What's The Opportunity In Illinois Tool Works?
According to my valuation model, Illinois Tool Works seems to be fairly priced at around 11% below my intrinsic value, which means if you buy Illinois Tool Works today, you'd be paying a fair price for it. And if you believe that the stock is really worth $251.65, then there isn't much room for the share price grow beyond what it's currently trading. Although, there may be an opportunity to buy in the future. This is because Illinois Tool Works's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Illinois Tool Works?
Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Illinois Tool Works' earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? ITW's optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven't considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you've been keeping tabs on ITW, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it's worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you want to dive deeper into Illinois Tool Works, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Illinois Tool Works you should be aware of.
If you are no longer interested in Illinois Tool Works, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.