Price to FCFE (P/FCFE)
Free Cash Flow to Equity (FCFE)
Illinois Tool Works Inc., FCFE 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 cash flow profile exhibits a period of expansion in operating performance followed by a moderate contraction, while the cash available to equity holders demonstrates significant volatility over the five-year period.
- Net Cash Provided by Operating Activities
- Operating cash flows experienced a growth trend from 2017 to 2019, rising from 2,402 million to a peak of 2,995 million. Following this peak, a downward trend was observed, with values decreasing to 2,807 million in 2020 and further to 2,557 million by the end of 2021.
- Free Cash Flow to Equity (FCFE) Trends
- FCFE exhibited higher volatility than operating cash flows. A notable decrease occurred in 2018, where FCFE dropped to 1,622 million. This was followed by a sharp recovery in 2019, reaching a period high of 3,116 million. Subsequent years showed a consistent decline, ending at 2,128 million in 2021.
- Relationship Between Operating Cash and FCFE
- The variance between operating cash flow and FCFE indicates shifting capital allocation and financing activities. In 2018, FCFE was substantially lower than operating cash flow, suggesting a period of high capital expenditure or debt repayment. In contrast, 2019 saw FCFE exceed operating cash flow, which typically indicates a net increase in debt or a significant reduction in capital investments. By 2021, FCFE remained below operating cash flow, reflecting a return to a pattern where capital requirements or debt obligations offset a portion of the operating gains.
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Price to FCFE Ratio, Current
Illinois Tool Works Inc., current P/FCFE calculation, comparison to benchmarks
| No. shares of common stock outstanding | 312,926,939 |
| Selected Financial Data (US$) | |
| Free cash flow to equity (FCFE) (in millions) | 2,128) |
| FCFE per share | 6.80 |
| Current share price (P) | 217.72 |
| Valuation Ratio | |
| P/FCFE | 32.02 |
| Benchmarks | |
| P/FCFE, Competitors1 | |
| Boeing Co. | — |
| Caterpillar Inc. | 25.89 |
| Eaton Corp. plc | 36.34 |
| GE Aerospace | 39.26 |
| Honeywell International Inc. | 9.00 |
| Lockheed Martin Corp. | 17.78 |
| RTX Corp. | 59.08 |
Based on: 10-K (reporting date: 2021-12-31).
1 Click competitor name to see calculations.
If the company P/FCFE is lower then the P/FCFE of benchmark then company is relatively undervalued.
Otherwise, if the company P/FCFE is higher then the P/FCFE of benchmark then company is relatively overvalued.
Price to FCFE Ratio, Historical
Illinois Tool Works Inc., historical P/FCFE calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| No. shares of common stock outstanding1 | 312,926,939 | 316,662,263 | 318,864,237 | 328,108,383 | 341,545,719 | |
| Selected Financial Data (US$) | ||||||
| Free cash flow to equity (FCFE) (in millions)2 | 2,128) | 2,577) | 3,116) | 1,622) | 2,316) | |
| FCFE per share3 | 6.80 | 8.14 | 9.77 | 4.94 | 6.78 | |
| Share price1, 4 | 217.72 | 200.98 | 187.86 | 144.21 | 163.36 | |
| Valuation Ratio | ||||||
| P/FCFE5 | 32.02 | 24.70 | 19.22 | 29.17 | 24.09 | |
| Benchmarks | ||||||
| P/FCFE, Competitors6 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 16.36 | — | — | — | — | |
| Eaton Corp. plc | 24.43 | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | 46.23 | — | — | — | — | |
| Lockheed Martin Corp. | 14.65 | — | — | — | — | |
| RTX Corp. | 35.07 | — | — | — | — | |
| P/FCFE, Sector | ||||||
| Capital Goods | — | — | — | — | — | |
| P/FCFE, 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 Data adjusted for splits and stock dividends.
3 2021 Calculation
FCFE per share = FCFE ÷ No. shares of common stock outstanding
= 2,128,000,000 ÷ 312,926,939 = 6.80
4 Closing price as at the filing date of Illinois Tool Works Inc. Annual Report.
5 2021 Calculation
P/FCFE = Share price ÷ FCFE per share
= 217.72 ÷ 6.80 = 32.02
6 Click competitor name to see calculations.
An analysis of the financial metrics from 2017 to 2021 reveals a divergence between share price appreciation and free cash flow to equity (FCFE) per share, resulting in significant volatility in the P/FCFE valuation multiple.
- Share Price Performance
- The share price exhibited a fluctuating but generally upward trajectory over the five-year period. After a decline in 2018 to 144.21 US$, the price entered a sustained growth phase, rising consecutively through 2019, 2020, and 2021, eventually reaching a peak of 217.72 US$.
- Free Cash Flow to Equity (FCFE) Trends
- FCFE per share demonstrated considerable instability. A notable contraction occurred in 2018, dropping to 4.94 US$, followed by a sharp peak in 2019 at 9.77 US$. Subsequent years showed a steady decline, with the value falling to 8.14 US$ in 2020 and further to 6.80 US$ by the end of 2021.
- P/FCFE Ratio Dynamics
- The P/FCFE ratio fluctuated in response to the inverse movements of the share price and FCFE per share. The lowest valuation multiple of 19.22 was recorded in 2019, coinciding with the peak in FCFE per share. Conversely, the ratio expanded significantly in 2021 to 32.02, driven by the combination of the highest recorded share price and a declining FCFE per share.
The overall trend indicates that while the market value of the equity grew steadily from 2018 onward, the underlying free cash flow available to shareholders did not maintain a parallel growth rate. This misalignment led to a progressive expansion of the P/FCFE multiple in the final two years of the period analyzed.
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