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Illinois Tool Works Inc. (NYSE:ITW) saw significant share price movement during recent months on the NYSE, rising to highs of $158.33 and falling to the lows of $140.65. 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's current trading price of $142.39 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.
What is Illinois Tool Works worth?
According to my valuation model, Illinois Tool Works seems to be fairly priced at around 9.14% above my intrinsic value, which means if you buy Illinois Tool Works today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $130.47, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Illinois Tool Works’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Illinois Tool Works generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by a double-digit 11% over the next couple of years, the outlook is positive for Illinois Tool Works. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in ITW’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. 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 an eye on ITW, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Illinois Tool Works. You can find everything you need to know about Illinois Tool Works in the latest infographic research report. If you are no longer interested in Illinois Tool Works, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.