Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Illinois Tool Works Inc. (NYSE:ITW)

Return on Capital (ROC)

Advanced level

Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company’s debt and equity structure. It measures business productivity performance.


Return on Invested Capital (ROIC)

Illinois Tool Works Inc., ROIC calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Net operating profit after taxes (NOPAT)1 2,672  2,774  1,924  1,924  1,971 
Invested capital2 13,033  12,895  14,406  14,140  14,601 
Performance Ratio
ROIC3 20.50% 21.51% 13.36% 13.61% 13.50%
Benchmarks
ROIC, Competitors4
Caterpillar Inc. 11.78% 12.15% 4.56% -1.90% 3.70%

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

1 NOPAT. See details »

2 Invested capital. See details »

3 2019 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 2,672 ÷ 13,033 = 20.50%

4 Click competitor name to see calculations.

Performance ratio Description The company
ROIC A measure of the periodic, after tax, cash-on-cash yield earned in the business. Illinois Tool Works Inc.’s ROIC improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

Decomposition of ROIC

Illinois Tool Works Inc., decomposition of ROIC

Microsoft Excel LibreOffice Calc
ROIC = OPM1 × TO2 × 1 – CTR3
Dec 31, 2019 20.50% = 24.49% × 1.08 × 77.49%
Dec 31, 2018 21.51% = 24.49% × 1.15 × 76.65%
Dec 31, 2017 13.36% = 24.56% × 1.00 × 54.64%
Dec 31, 2016 13.61% = 23.02% × 0.96 × 61.41%
Dec 31, 2015 13.50% = 21.41% × 0.92 × 68.77%

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

1 Operating profit margin (OPM). See calculations »

2 Turnover of capital (TO). See calculations »

3 Effective cash tax rate (CTR). See calculations »

The primary reason for the decrease in return on invested capital (ROIC) over 2019 year is the decrease in efficiency measured by turnover of capital (TO) ratio.


Operating Profit Margin (OPM)

Illinois Tool Works Inc., OPM calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Net operating profit after taxes (NOPAT)1 2,672  2,774  1,924  1,924  1,971 
Add: Cash operating taxes2 776  845  1,597  1,209  895 
Net operating profit before taxes (NOPBT) 3,449  3,619  3,522  3,133  2,865 
 
Operating revenue 14,109  14,768  14,314  13,599  13,405 
Add: Increase (decrease) in deferred revenue and customer deposits (27) 10  25  11  (25)
Adjusted operating revenue 14,082  14,778  14,339  13,610  13,380 
Profitability Ratio
OPM3 24.49% 24.49% 24.56% 23.02% 21.41%
Benchmarks
OPM, Competitors4
Caterpillar Inc. 16.21% 15.43% 10.76% -0.56% 8.20%

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

1 NOPAT. See details »

2 Cash operating taxes. See details »

3 2019 Calculation
OPM = 100 × NOPBT ÷ Adjusted operating revenue
= 100 × 3,449 ÷ 14,082 = 24.49%

4 Click competitor name to see calculations.

Profitability ratio Description The company
OPM The operating profit margin (OPM) is the ratio of pretax economic earnings, or NOPBT, to sales. Illinois Tool Works Inc.’s OPM deteriorated from 2017 to 2018 but then slightly improved from 2018 to 2019.

Turnover of Capital (TO)

Illinois Tool Works Inc., TO calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Operating revenue 14,109  14,768  14,314  13,599  13,405 
Add: Increase (decrease) in deferred revenue and customer deposits (27) 10  25  11  (25)
Adjusted operating revenue 14,082  14,778  14,339  13,610  13,380 
 
Invested capital1 13,033  12,895  14,406  14,140  14,601 
Efficiency Ratio
TO2 1.08 1.15 1.00 0.96 0.92
Benchmarks
TO, Competitors3
Caterpillar Inc. 0.92 0.97 0.84 0.69 0.73

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

1 Invested capital. See details »

2 2019 Calculation
TO = Adjusted operating revenue ÷ Invested capital
= 14,082 ÷ 13,033 = 1.08

3 Click competitor name to see calculations.

Efficiency ratio Description The company
TO The turnover of capital (TO) is the ratio of sales to invested capital. Capital turnover is a function of the efficiency of working capital management and of net fixed assets. Illinois Tool Works Inc.’s TO improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

Effective Cash Tax Rate (CTR)

Illinois Tool Works Inc., CTR calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Net operating profit after taxes (NOPAT)1 2,672  2,774  1,924  1,924  1,971 
Add: Cash operating taxes2 776  845  1,597  1,209  895 
Net operating profit before taxes (NOPBT) 3,449  3,619  3,522  3,133  2,865 
Tax Rate
CTR3 22.51% 23.35% 45.36% 38.59% 31.23%
Benchmarks
CTR, Competitors4
Caterpillar Inc. 21.39% 19.19% 49.63% 38.31%

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

1 NOPAT. See details »

2 Cash operating taxes. See details »

3 2019 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 776 ÷ 3,449 = 22.51%

4 Click competitor name to see calculations.

Tax rate Description The company
CTR Effective cash tax rate on operating income. Illinois Tool Works Inc.’s CTR decreased from 2017 to 2018 and from 2018 to 2019.