Illinois Tool Works Inc. (NYSE:ITW)

Net operating profit after taxes (NOPAT)

The net operating profit after taxes demonstrated a generally positive trend over the analyzed period. Starting at 1924 million USD in 2017, it increased significantly to 2774 million USD in 2018. Although a slight decline was observed in 2019 and 2020, with figures of 2672 million USD and 2268 million USD respectively, the metric recovered strongly in 2021, reaching 2907 million USD. This indicates resilience and capacity for growth after a temporary downturn.

Invested capital

The invested capital showed a moderate fluctuation across the years. Initially, it decreased from 14406 million USD in 2017 to 12895 million USD in 2018. Subsequently, it experienced a gradual increase from 2018 through 2021, ending at 13555 million USD. Overall, the invested capital remained relatively stable with minor variances, reflecting controlled investment levels during the period.

Return on invested capital (ROIC)

The return on invested capital exhibited a variable pattern. The ratio rose sharply from 13.36% in 2017 to a peak of 21.51% in 2018, indicating enhanced efficiency in capital utilization. In the following years, ROIC slightly declined to 20.5% in 2019 and further to 16.88% in 2020, mirroring the dip in profitability and potential impacts on efficiency. However, by 2021, the ROIC recovered to 21.45%, nearly matching the 2018 peak, which signals improved effectiveness in generating returns from invested capital.

Operating Profit Margin (OPM)

The operating profit margin demonstrated relative stability from 2017 through 2019, holding constant at approximately 24.5%. A slight decrease occurred in 2020, dropping to 23.27%, possibly reflecting challenges encountered during that year. However, a notable recovery was observed in 2021, with the margin increasing to 25.49%, the highest level recorded in the five-year period.

Turnover of Capital (TO)

The turnover of capital exhibited an upward trend from 2017 to 2018, rising from 1.00 to 1.15. This was followed by a modest decline in 2019 to 1.08 and a more pronounced decrease in 2020 to 0.94. In 2021, turnover rebounded to 1.08, indicating a partial recovery in capital utilization efficiency after the downturn experienced in 2020.

1 – Effective Cash Tax Rate (CTR)

The metric 1 – CTR experienced a significant increase from 54.64% in 2017 to over 76% in 2018, stabilizing around 77% in subsequent years through 2021. This stabilization at a high level suggests a considerable increase in effective cash taxation from 2018 onward, sustained across the remaining years.

Return on Invested Capital (ROIC)

Return on invested capital showed a marked increase between 2017 and 2018, rising from 13.36% to 21.51%. After a slight dip in 2019 to 20.5%, ROIC declined further in 2020 to 16.88%. The metric recovered in 2021, climbing back to 21.45%, closely approaching the peak experienced in 2018. This pattern indicates variability influenced by external or internal factors, with 2020 representing a period of decreased capital efficiency and profitability.

The annual financial data for the company reveals several noteworthy trends in profitability and revenue over the five-year period ending December 31, 2021.

Net Operating Profit Before Taxes (NOPBT)

The NOPBT displayed moderate fluctuations throughout the period. Beginning at $3,522 million in 2017, it rose slightly to $3,619 million in 2018 before experiencing a decline to $3,449 million in 2019. A significant drop occurred in 2020 to $2,933 million, likely reflecting broader economic challenges during that year. However, profitability recovered strongly in 2021, reaching $3,728 million, the highest in this timeframe.

Adjusted Operating Revenue

Operating revenue showed a similar pattern to NOPBT. Starting at $14,339 million in 2017, revenue increased to a peak of $14,778 million in 2018. Thereafter, it decreased to $14,082 million in 2019 and further declined to $12,608 million in 2020. In 2021, it rebounded robustly to $14,627 million, nearly matching the prior peak observed in 2018.

Operating Profit Margin (OPM)

The operating profit margin remained relatively stable, with minor variations over the years. It was 24.56% in 2017 and slightly decreased to 24.49% in both 2018 and 2019. In 2020, the margin dropped more noticeably to 23.27%, correlating with the declines in profit and revenue. The margin improved significantly in 2021, rising to 25.49%, the highest margin recorded in the five-year span, indicating enhanced operational efficiency or cost management during recovery.

In summary, the company experienced a downturn in both profit and revenue in 2020, accompanied by a lower operating margin, which may correspond to adverse external conditions influencing performance. Both profit and revenue demonstrated a strong rebound by 2021, with profitability margins improving to their peak levels in the analyzed period. This suggests effective recovery strategies and a return to favorable operating conditions by the end of the timeframe.

The financial data reveals several noteworthy trends over the five-year period analyzed.

Adjusted Operating Revenue

This metric experienced fluctuations, beginning at 14,339 million US dollars in 2017 and rising to a peak of 14,778 million in 2018. Subsequently, revenue declined to 14,082 million in 2019 and continued to decrease more sharply to 12,608 million in 2020. In 2021, revenue rebounded to 14,627 million, nearly reaching the earlier high levels observed in 2018.

Invested Capital

Invested capital showed a different pattern, starting at 14,406 million US dollars in 2017, declining to 12,895 million in 2018, and then increasing moderately to 13,033 million in 2019. It continued rising to 13,434 million in 2020 and 13,555 million in 2021, indicating a gradual increase in capital investment after the initial drop.

Turnover of Capital (TO)

The turnover of capital ratio, representing efficiency in using invested capital to generate revenue, started at 1 in 2017 and improved to 1.15 in 2018, reflecting better utilization. However, it fell to 1.08 in 2019 and declined significantly to 0.94 in 2020, suggesting a decrease in efficiency. By 2021, the TO ratio recovered somewhat to 1.08, though it remained below the peak in 2018.

Overall, the data indicates that the company’s revenue and capital utilization were both impacted notably in 2020, likely reflective of broader economic or operational challenges. However, both metrics show signs of recovery in 2021, with revenue almost reaching previous highs and capital turnover improving. Invested capital shows a relatively stable upward trend after an initial dip, suggesting ongoing investment despite temporary revenue fluctuations.

Cash Operating Taxes

The cash operating taxes exhibit a decreasing trend from 2017 to 2020, dropping from 1,597 million US$ in 2017 to 666 million US$ in 2020. However, there is a rise in 2021 to 821 million US$, indicating a partial recovery in tax payments after the previous decline.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes remained relatively stable between 2017 and 2019, fluctuating within a narrow range around 3,500 million US$. There is a notable drop in 2020 to 2,933 million US$, likely influenced by external factors affecting profitability. In 2021, the NOPBT rebounded to 3,728 million US$, surpassing previous levels and signaling a recovery in operating profitability.

Effective Cash Tax Rate (CTR)

The effective cash tax rate shows a sharp decline from 45.36% in 2017 to around 23% in 2018, maintaining a relatively stable rate close to 22-23% through 2021. This indicates a significant reduction in the tax burden as a percentage of operating profit starting in 2018, which remained consistent in the following years.