Enterprise Value to EBITDA (EV/EBITDA)
Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)
Illinois Tool Works Inc., EBITDA calculation
US$ in millions
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).
The earnings before interest, tax, depreciation and amortization (EBITDA) exhibited a fluctuating trajectory between 2017 and 2021, characterized by a period of stability, a significant contraction, and a subsequent recovery. EBITDA grew from 3,786 million US$ in 2017 to a peak of 3,923 million US$ in 2018, before entering a downward trend that culminated in a low of 3,183 million US$ in 2020. By the end of 2021, the metric recovered to 3,805 million US$, effectively returning to 2017 levels.
- Operating Profitability Trends
- A notable correlation is observed between EBITDA, EBIT, and EBT, as all three metrics followed an identical directional pattern. The sharpest decline occurred in 2020, where EBITDA decreased by approximately 15.7% compared to the previous year. This contraction was mirrored in EBIT, which dropped from 3,509 million US$ in 2019 to 2,910 million US$ in 2020.
- Depreciation and Amortization Stability
- The variance between EBITDA and EBIT remained remarkably consistent throughout the five-year period. The implied depreciation and amortization expenses ranged from 256 million US$ in 2017 to 277 million US$ in 2021. This stability suggests a consistent capital asset base and a predictable depreciation schedule, indicating that the volatility in overall earnings was driven by operational performance rather than changes in asset accounting or massive divestments.
- Bottom-Line Conversion
- Net income demonstrated higher volatility than EBITDA. While EBITDA saw a modest increase between 2017 and 2018, net income grew significantly from 1,687 million US$ to 2,563 million US$ during the same interval. The recovery in 2021 was strong across all metrics, with net income reaching its five-year peak of 2,694 million US$, coinciding with the rebound in EBITDA to 3,805 million US$.
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Enterprise Value to EBITDA Ratio, Current
Illinois Tool Works Inc., current EV/EBITDA calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 74,291) |
| Earnings before interest, tax, depreciation and amortization (EBITDA) | 3,805) |
| Valuation Ratio | |
| EV/EBITDA | 19.52 |
| Benchmarks | |
| EV/EBITDA, Competitors1 | |
| Boeing Co. | 24.63 |
| Caterpillar Inc. | 28.51 |
| Eaton Corp. plc | 29.13 |
| GE Aerospace | 28.82 |
| Honeywell International Inc. | 10.98 |
| Lockheed Martin Corp. | 15.75 |
| RTX Corp. | 19.24 |
| EV/EBITDA, Sector | |
| Capital Goods | 35.81 |
| EV/EBITDA, Industry | |
| Industrials | 24.16 |
Based on: 10-K (reporting date: 2021-12-31).
1 Click competitor name to see calculations.
If the company EV/EBITDA is lower then the EV/EBITDA of benchmark then company is relatively undervalued.
Otherwise, if the company EV/EBITDA is higher then the EV/EBITDA of benchmark then company is relatively overvalued.
Enterprise Value to EBITDA Ratio, Historical
Illinois Tool Works Inc., historical EV/EBITDA 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) | ||||||
| Enterprise value (EV)1 | 74,291) | 69,202) | 65,683) | 53,197) | 61,033) | |
| Earnings before interest, tax, depreciation and amortization (EBITDA)2 | 3,805) | 3,183) | 3,776) | 3,923) | 3,786) | |
| Valuation Ratio | ||||||
| EV/EBITDA3 | 19.52 | 21.74 | 17.39 | 13.56 | 16.12 | |
| Benchmarks | ||||||
| EV/EBITDA, Competitors4 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 12.43 | — | — | — | — | |
| Eaton Corp. plc | 17.06 | — | — | — | — | |
| GE Aerospace | 95.57 | — | — | — | — | |
| Honeywell International Inc. | 15.57 | — | — | — | — | |
| Lockheed Martin Corp. | 11.97 | — | — | — | — | |
| RTX Corp. | 15.48 | — | — | — | — | |
| EV/EBITDA, Sector | ||||||
| Capital Goods | 19.87 | — | — | — | — | |
| EV/EBITDA, Industry | ||||||
| Industrials | 16.30 | — | — | — | — | |
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).
3 2021 Calculation
EV/EBITDA = EV ÷ EBITDA
= 74,291 ÷ 3,805 = 19.52
4 Click competitor name to see calculations.
The valuation metrics for the period between 2017 and 2021 exhibit significant fluctuations in the Enterprise Value to EBITDA (EV/EBITDA) ratio, characterized by a general trend of valuation expansion. While the ratio began at 16.12 in 2017, it experienced a period of volatility, reaching a peak in 2020 before moderating slightly in 2021.
- Enterprise Value Trends
- Enterprise value demonstrated a general upward trajectory over the five-year period, with the exception of a contraction in 2018. After reaching a low of 53,197 million USD in 2018, the value grew consistently each year, culminating in a peak of 74,291 million USD by December 31, 2021.
- EBITDA Performance
- Earnings before interest, tax, depreciation, and amortization remained relatively stable between 2017 and 2019, fluctuating around the 3,800 million USD mark. A notable contraction occurred in 2020, where EBITDA declined to 3,183 million USD. A recovery followed in 2021, with the figure returning to 3,805 million USD, effectively neutralizing the previous year's decline.
- EV/EBITDA Ratio Analysis
- The EV/EBITDA ratio reached its lowest point of 13.56 in 2018, driven by a simultaneous decrease in enterprise value and an increase in EBITDA. The ratio then escalated sharply, peaking at 21.74 in 2020. This peak was the result of a divergence where enterprise value continued to rise despite a significant drop in EBITDA. By 2021, the ratio compressed to 19.52 as EBITDA recovered, although the enterprise value continued to climb.
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