Analysis of Long-term (Investment) Activity Ratios
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
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- Common-Size Income Statement
- Analysis of Reportable Segments
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Price to Book Value (P/BV) since 2005
- Price to Sales (P/S) since 2005
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Long-term Activity Ratios (Summary)
Illinois Tool Works Inc., long-term (investment) activity ratios
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Net fixed asset turnover | ||||||
| Net fixed asset turnover (including operating lease, right-of-use asset) | ||||||
| Total asset turnover | ||||||
| Equity turnover |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
- Net Fixed Asset Turnover
- The net fixed asset turnover ratio showed a general decline from 8.05 in 2017, reaching a low of 7.08 in 2020 before recovering somewhat to 7.99 in 2021. This suggests a decrease in efficiency in generating sales from fixed assets during 2019 and 2020, followed by partial improvement in the subsequent year.
- Net Fixed Asset Turnover (Including Operating Lease, Right-of-Use Asset)
- When including operating lease and right-of-use assets, a similar downward trend is observed, with a ratio declining from 8.05 in 2017 to a low of 6.31 in 2020. The ratio slightly improved to 7.12 in 2021. The lower ratios compared to the basic net fixed asset turnover indicate the impact of including additional leased assets on asset utilization metrics, with the trend mirroring the traditional fixed asset turnover pattern.
- Total Asset Turnover
- Total asset turnover increased from 0.85 in 2017 to a peak of 0.99 in 2018. It then decreased to 0.94 in 2019, followed by a more pronounced dip to 0.81 in 2020. A recovery was observed in 2021, with the ratio rising to 0.90. This pattern indicates overall fluctuations in the efficiency of generating sales from total assets, with a notable decline during 2020, likely attributable to external market conditions, and a partial rebound thereafter.
- Equity Turnover
- Equity turnover displayed an upward trend from 3.12 in 2017 to 4.66 in 2019, signifying improved usage of shareholder equity to generate sales. However, this was followed by a decline to 3.95 in 2020, aligning with the trend in other turnover measures, and then stability in 2021 at 3.99. The initial increase highlights growing equity efficiency, while the subsequent decline and stabilization likely reflect challenges encountered during the 2020 period.
Net Fixed Asset Turnover
Illinois Tool Works Inc., net fixed asset turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating revenue | ||||||
| Net plant and equipment | ||||||
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover1 | ||||||
| Benchmarks | ||||||
| Net Fixed Asset Turnover, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Net Fixed Asset Turnover, Sector | ||||||
| Capital Goods | ||||||
| Net Fixed Asset Turnover, Industry | ||||||
| Industrials | ||||||
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Net fixed asset turnover = Operating revenue ÷ Net plant and equipment
= ÷ =
2 Click competitor name to see calculations.
- Operating Revenue
- The operating revenue exhibited moderate fluctuations over the five-year period. It initially increased from 14,314 million US dollars in 2017 to a peak of 14,768 million US dollars in 2018. This was followed by a decline to 14,109 million US dollars in 2019 and a more pronounced decrease to 12,574 million US dollars in 2020. The revenue rebounded somewhat in 2021, reaching 14,455 million US dollars, but did not exceed the 2018 level.
- Net Plant and Equipment
- The net plant and equipment value remained relatively stable throughout the period. It experienced a slight increase from 1,778 million US dollars in 2017 to 1,791 million US dollars in 2018, followed by a small decline in 2019 to 1,729 million US dollars. The value then increased again in 2020 and 2021 to 1,777 and 1,809 million US dollars respectively, reflecting a gradual but limited growth in capital investment or asset base.
- Net Fixed Asset Turnover
- The net fixed asset turnover ratio, which measures revenue generated per unit of fixed assets, showed a downward trend over the period. The ratio increased slightly from 8.05 in 2017 to 8.25 in 2018, indicating improved efficiency in using fixed assets during that year. However, from 2019 onward, the ratio declined significantly, reaching a low of 7.08 in 2020. This suggests reduced efficiency, possibly related to decreased revenue or increased asset base without proportional revenue growth. In 2021, the ratio improved to 7.99 but remained below the earlier peak values.
Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset)
Illinois Tool Works Inc., net fixed asset turnover (including operating lease, right-of-use asset) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating revenue | ||||||
| Net plant and equipment | ||||||
| Operating lease right-of-use assets | ||||||
| Net plant and equipment (including operating lease, right-of-use asset) | ||||||
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover (including operating lease, right-of-use asset)1 | ||||||
| Benchmarks | ||||||
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Sector | ||||||
| Capital Goods | ||||||
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Industry | ||||||
| Industrials | ||||||
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Net fixed asset turnover (including operating lease, right-of-use asset) = Operating revenue ÷ Net plant and equipment (including operating lease, right-of-use asset)
= ÷ =
2 Click competitor name to see calculations.
- Operating Revenue
- The operating revenue displayed a general fluctuation over the five-year period. Starting at 14,314 million US dollars in 2017, it experienced a slight increase in 2018 to 14,768 million, followed by a decline to 14,109 million in 2019. The revenue further decreased more notably in 2020 to 12,574 million, likely influenced by broader economic conditions during that year. However, in 2021, the operating revenue rebounded to 14,455 million, approaching the levels seen in 2017 and 2018. This suggests a recovery phase after the downturn in 2020.
- Net Plant and Equipment
- The net plant and equipment, including operating lease and right-of-use assets, showed a steady upward trend throughout the period. Beginning at 1,778 million US dollars in 2017, the figure increased incrementally each year, reaching 2,031 million by the end of 2021. This consistent growth indicates ongoing investment in fixed assets and possibly an expansion of the company's operational capacity.
- Net Fixed Asset Turnover
- The net fixed asset turnover ratio illustrates the efficiency with which the company utilized its fixed assets to generate revenue. The ratio started at 8.05 in 2017 and slightly increased to 8.25 in 2018, indicating improved efficiency. However, it declined over the next two years to 7.29 in 2019 and further down to 6.31 in 2020, reflecting reduced revenue generation per unit of fixed asset. In 2021, the turnover ratio partially recovered to 7.12, showing some improvement in asset utilization though still below the earlier peak levels. This pattern aligns with the revenue trend, suggesting operational challenges during 2019 and 2020 that affected asset productivity.
Total Asset Turnover
Illinois Tool Works Inc., total asset turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating revenue | ||||||
| Total assets | ||||||
| Long-term Activity Ratio | ||||||
| Total asset turnover1 | ||||||
| Benchmarks | ||||||
| Total Asset Turnover, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Total Asset Turnover, Sector | ||||||
| Capital Goods | ||||||
| Total Asset Turnover, Industry | ||||||
| Industrials | ||||||
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Total asset turnover = Operating revenue ÷ Total assets
= ÷ =
2 Click competitor name to see calculations.
The annual financial data indicates several notable trends in operational performance and asset management over the reported periods.
- Operating Revenue
- The operating revenue demonstrated some fluctuations during the five-year span. It grew from 14,314 million US dollars in 2017 to a peak of 14,768 million in 2018. Subsequently, the revenue decreased to 14,109 million in 2019 and further declined to 12,574 million in 2020. In 2021, there was a recovery to 14,455 million, almost reaching the levels observed in 2017 and 2018. This pattern suggests a period of instability possibly influenced by external economic factors, with a partial rebound in the latest year.
- Total Assets
- Total assets exhibited a decreasing trend from 16,780 million US dollars in 2017 to a low of 14,870 million in 2018. Following this decline, assets showed a gradual increase, reaching 15,068 million in 2019, 15,612 million in 2020, and 16,077 million in 2021. Despite this recovery, the 2021 asset base remained slightly below the 2017 level, indicating ongoing adjustments in asset composition or investment strategy.
- Total Asset Turnover
- The total asset turnover ratio varied over the period, highlighting changes in operational efficiency relative to asset utilization. The ratio improved from 0.85 in 2017 to a high of 0.99 in 2018, suggesting better utilization of assets to generate revenue in that year. However, the ratio declined to 0.94 in 2019 and further dropped to 0.81 in 2020, indicating decreased efficiency or challenges in leveraging assets effectively during these years. In 2021, the turnover ratio increased again to 0.90, signaling an improvement in asset use efficiency consistent with the revenue recovery observed in the same year.
Overall, the data reflects a period marked by revenue volatility and fluctuating asset levels, which affected asset turnover. The decline and subsequent partial recovery in both revenue and asset turnover suggest external or internal factors impacted operational performance, with a positive shift toward recovery in the final reported year.
Equity Turnover
Illinois Tool Works Inc., equity turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating revenue | ||||||
| Stockholders’ equity attributable to ITW | ||||||
| Long-term Activity Ratio | ||||||
| Equity turnover1 | ||||||
| Benchmarks | ||||||
| Equity Turnover, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Equity Turnover, Sector | ||||||
| Capital Goods | ||||||
| Equity Turnover, Industry | ||||||
| Industrials | ||||||
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Equity turnover = Operating revenue ÷ Stockholders’ equity attributable to ITW
= ÷ =
2 Click competitor name to see calculations.
- Operating Revenue
- The operating revenue experienced fluctuations over the five-year period. Starting at $14,314 million in 2017, revenue increased slightly to $14,768 million in 2018, followed by a decline to $14,109 million in 2019. It continued to decrease significantly in 2020 to $12,574 million, likely reflecting adverse conditions during that year. Revenue rebounded in 2021 to $14,455 million, approaching prior peak levels.
- Stockholders’ Equity Attributable to ITW
- Stockholders’ equity showed a declining trend from 2017 through 2019, starting at $4,585 million in 2017 and decreasing to $3,026 million by the end of 2019. In 2020, equity stabilized slightly at $3,181 million and increased moderately to $3,625 million in 2021, indicating some recovery but remaining below the initial 2017 level.
- Equity Turnover Ratio
- The equity turnover ratio, which measures the efficiency of using equity to generate revenue, improved notably from 3.12 in 2017 to a peak of 4.66 in 2019. This indicates enhanced utilization of equity despite declining absolute revenue and equity values. The ratio decreased to 3.95 in 2020, likely reflecting the revenue drop relative to equity, and slightly increased to 3.99 in 2021 as revenues recovered.
- Overall Trends and Insights
- The financial data suggest that the company experienced variable operating performance over the period, with notable impact in 2020 likely due to external factors affecting revenue. The decrease in stockholders’ equity from 2017 to 2019 may indicate share repurchases, dividends, or losses, though the partial recovery in 2021 is positive. The equity turnover ratio trend points to improved efficiency in equity utilization up to 2019, with some decline during the downturn and slight improvement thereafter. This pattern highlights adaptability but also sensitivity to external market conditions during 2020.