Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
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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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Profitability Ratios (Summary)
Illinois Tool Works Inc., profitability ratios
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).
- Gross Profit Margin
- The gross profit margin remained relatively stable over the five-year period, fluctuating slightly between 41.27% and 41.97%. This indicates consistent efficiency in production and cost control at the gross profit level with minor variations from year to year.
- Operating Profit Margin
- The operating profit margin showed a slight downward trend between 2017 and 2020, decreasing from 24.41% to 22.92%. However, it partially recovered in 2021, rising again to 24.05%. This pattern suggests some pressure on operating expenses or pricing during the period, with a rebound in the most recent year indicating potential operational improvements.
- Net Profit Margin
- The net profit margin exhibited an overall increase through the years, rising from 11.79% in 2017 to 18.64% in 2021. There was a noticeable jump from 2017 to 2018 followed by relatively high and stable margins until 2021, where the margin peaked. This trend reflects enhanced profitability after accounting for all expenses, taxes, and other deductions.
- Return on Equity (ROE)
- Return on equity showed significant volatility throughout the period. Starting at 36.79% in 2017, it nearly doubled in 2018 to 78.76%, followed by a further increase in 2019 to 83.31%. Despite a decline in 2020 to 66.30%, the ROE increased again to 74.32% in 2021. These high and variable returns suggest substantial leverage or efficient use of equity, but also imply higher risk or fluctuations in net income relative to shareholder equity.
- Return on Assets (ROA)
- The return on assets increased significantly from 10.05% in 2017 to 17.24% in 2018, then slightly declined to 16.73% in 2019 and further dropped to 13.51% in 2020 before recovering to 16.76% in 2021. This indicates improved asset utilization early in the period, followed by some fluctuations, possibly reflecting changes in asset base efficiency or profitability.
Return on Sales
Return on Investment
Gross Profit Margin
Illinois Tool Works Inc., gross profit margin 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) | ||||||
| Gross profit | ||||||
| Operating revenue | ||||||
| Profitability Ratio | ||||||
| Gross profit margin1 | ||||||
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
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
Gross profit margin = 100 × Gross profit ÷ Operating revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
- Trend in Operating Revenue
- Operating revenue exhibited fluctuations over the period analyzed. The revenue increased from approximately 14.3 billion USD in 2017 to a peak of 14.8 billion USD in 2018, followed by a decline to 14.1 billion USD in 2019. There was a notable drop to 12.6 billion USD in 2020, likely reflecting external challenges during that year. However, the revenue rebounded strongly in 2021, reaching around 14.5 billion USD, nearing pre-downturn levels.
- Trend in Gross Profit
- Gross profit mirrored the revenue trend with some differences. Starting at 6.0 billion USD in 2017, it increased slightly in 2018 to 6.2 billion USD but then declined in 2019 and more sharply in 2020 to approximately 5.2 billion USD. In 2021, gross profit recovered to nearly 6.0 billion USD, close to the initial 2017 level but still below the 2018 peak.
- Gross Profit Margin Analysis
- The gross profit margin percentage remained relatively stable throughout the period, ranging narrowly between 41.27% and 41.97%. The margin was highest in 2019 at 41.97% and lowest in 2021 at 41.27%. This indicates that despite fluctuations in absolute revenue and profit, the efficiency or markup level in generating profit from revenue maintained a consistent proportion.
- Overall Insights
- The data suggests that the company experienced external pressures around 2020, reflected in declines in both revenue and gross profit. The relatively stable gross margin indicates consistent cost and pricing control despite such pressures. The rebound in 2021 demonstrates resilience and an ability to restore sales and profit levels. The consistent margin ratio also implies that changes in absolute profit primarily followed top-line revenue movement rather than operational efficiency shifts.
Operating Profit Margin
Illinois Tool Works Inc., operating profit margin 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 income | ||||||
| Operating revenue | ||||||
| Profitability Ratio | ||||||
| Operating profit margin1 | ||||||
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Operating Profit Margin, Sector | ||||||
| Capital Goods | ||||||
| Operating Profit Margin, 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
Operating profit margin = 100 × Operating income ÷ Operating revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
- Operating Income
- The operating income showed a generally stable trend between 2017 and 2019, remaining within a range of approximately 3400 to 3600 million US dollars. In 2020, there was a noticeable decline to 2882 million US dollars, reflecting a decrease likely influenced by external factors during that period. However, the operating income rebounded in 2021, increasing to 3477 million US dollars, nearly returning to pre-2020 levels.
- Operating Revenue
- Operating revenue experienced fluctuations over the five-year period. It increased slightly from 14314 million US dollars in 2017 to 14768 million US dollars in 2018, then decreased to 14109 million US dollars in 2019. A more pronounced decline occurred in 2020, with revenue dropping to 12574 million US dollars. The subsequent year, 2021, showed a recovery back to 14455 million US dollars, indicating a rebound in sales or service volumes.
- Operating Profit Margin
- The operating profit margin remained relatively stable throughout the period, fluctuating modestly around the mid-20% range. It started at 24.41% in 2017, slightly decreased to 24.27% in 2018, and continued a gradual decline to 24.11% in 2019. The margin fell more noticeably to 22.92% in 2020, likely due to the drop in operating income and revenue that year. In 2021, the margin improved to 24.05%, nearly regaining its earlier levels.
Net Profit Margin
Illinois Tool Works Inc., net profit margin 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) | ||||||
| Net income | ||||||
| Operating revenue | ||||||
| Profitability Ratio | ||||||
| Net profit margin1 | ||||||
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Net Profit Margin, Sector | ||||||
| Capital Goods | ||||||
| Net Profit Margin, 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 profit margin = 100 × Net income ÷ Operating revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
- Net Income
- The net income demonstrated a generally positive trend over the analyzed periods. Starting at 1,687 million US dollars in 2017, it increased substantially to 2,563 million in 2018. After a slight decline to 2,521 million in 2019, net income further decreased to 2,109 million in 2020, likely reflecting external economic challenges during that period. However, 2021 saw a strong recovery, with net income rising to 2,694 million, reaching the highest level in the five-year timeframe.
- Operating Revenue
- Operating revenue exhibited moderate fluctuations throughout the periods. It increased from 14,314 million US dollars in 2017 to a peak of 14,768 million in 2018, followed by a decrease to 14,109 million in 2019. The year 2020 experienced a more pronounced decline to 12,574 million, consistent with the global economic downturn during that year. Revenue rebounded in 2021, climbing back to 14,455 million, approaching the levels observed in earlier years.
- Net Profit Margin
- The net profit margin percentage showed a steady upward trend overall. Beginning at 11.79% in 2017, it increased significantly to 17.36% in 2018 and continued a slight rise to 17.87% in 2019. There was a marginal decrease to 16.77% in 2020, aligning with the reduction in net income and revenue that year. By 2021, the net profit margin expanded to 18.64%, the highest margin in the period analyzed, indicating improved profitability efficiency relative to revenue.
Return on Equity (ROE)
Illinois Tool Works Inc., ROE 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) | ||||||
| Net income | ||||||
| Stockholders’ equity attributable to ITW | ||||||
| Profitability Ratio | ||||||
| ROE1 | ||||||
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| ROE, Sector | ||||||
| Capital Goods | ||||||
| ROE, 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
ROE = 100 × Net income ÷ Stockholders’ equity attributable to ITW
= 100 × ÷ =
2 Click competitor name to see calculations.
- Net Income
- The net income demonstrates a generally positive trajectory over the observed period, increasing from 1687 million US dollars in 2017 to 2694 million US dollars in 2021. Despite a slight decline from 2563 million US dollars in 2018 to 2521 million US dollars in 2019, and a more noticeable dip to 2109 million US dollars in 2020, the overall trend is upward, culminating in the highest value recorded in 2021.
- Stockholders’ Equity Attributable to ITW
- Stockholders' equity exhibits a declining trend from 4585 million US dollars in 2017 to 3026 million US dollars in 2019, indicating a notable decrease in equity over these three years. However, starting in 2020, equity values show an improvement, rising modestly to 3181 million US dollars and then to 3625 million US dollars in 2021. Despite this recovery, equity in 2021 remains below the 2017 level.
- Return on Equity (ROE)
- Return on equity displays significant volatility but remains at a high level throughout the period. Beginning at 36.79% in 2017, ROE more than doubles in 2018 to 78.76% and continues to increase to 83.31% in 2019. Although there is a decline to 66.3% in 2020, ROE rebounds to 74.32% in 2021. These fluctuations suggest fluctuating profit generation efficiency relative to shareholders' equity, influenced likely by the variable equity base.
- Overall Insights
- The data reveals that profitability, as measured by net income and ROE, remains strong with upward momentum, especially by the end of the period. The drop and subsequent partial recovery in stockholders’ equity imply potential transactions affecting equity or changes in asset valuation. The elevated ROE levels, particularly in the years of reduced equity, suggest the company has effectively leveraged its equity base to generate profitability, although this may also signal higher financial risk or capital efficiency considerations.
Return on Assets (ROA)
Illinois Tool Works Inc., ROA 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) | ||||||
| Net income | ||||||
| Total assets | ||||||
| Profitability Ratio | ||||||
| ROA1 | ||||||
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| ROA, Sector | ||||||
| Capital Goods | ||||||
| ROA, 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
ROA = 100 × Net income ÷ Total assets
= 100 × ÷ =
2 Click competitor name to see calculations.
- Net Income
- The net income demonstrated a fluctuating but overall increasing trend over the period. Starting at $1,687 million in 2017, it surged sharply to $2,563 million in 2018, slightly decreased to $2,521 million in 2019, then declined more noticeably to $2,109 million in 2020, before rising again to reach the highest level of $2,694 million in 2021. This pattern suggests a recovery after a dip in 2020.
- Total Assets
- Total assets experienced some volatility but generally trended upward over the five-year span. After a decline from $16,780 million in 2017 to $14,870 million in 2018, assets stabilized and then exhibited modest growth: $15,068 million in 2019, $15,612 million in 2020, and $16,077 million in 2021. This indicates a relatively steady asset base with some recovery following the initial drop in 2018.
- Return on Assets (ROA)
- The return on assets followed a pattern similar to net income, illustrating fluctuations with an overall elevated level. Starting at 10.05% in 2017, ROA increased significantly to 17.24% in 2018, then slightly decreased to 16.73% in 2019. It dropped to 13.51% in 2020, likely reflecting the impact of that year's lower net income, before recovering to 16.76% in 2021. The data suggests relatively efficient asset utilization, with temporary setbacks followed by recovery.