Common Stock Valuation Ratios (Price Multiples)
Valuation ratios measure the quantity of an asset or flaw (e.g., earnings) associated with ownership of a specified claim (e.g., a share of ownership of the enterprise).
Current Valuation Ratios
Illinois Tool Works Inc., current price multiples
| Illinois Tool Works Inc. | Boeing Co. | Caterpillar Inc. | Eaton Corp. plc | GE Aerospace | Honeywell International Inc. | Lockheed Martin Corp. | RTX Corp. | Capital Goods | Industrials | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||||||||
| Current share price (P) | $217.72 | ||||||||||||
| No. shares of common stock outstanding | 312,926,939 | ||||||||||||
| Growth rate (g) | 31.62% | ||||||||||||
| Earnings per share (EPS) | $8.61 | ||||||||||||
| Next year expected EPS | $11.33 | ||||||||||||
| Operating profit per share | $11.11 | ||||||||||||
| Sales per share | $46.19 | ||||||||||||
| Book value per share (BVPS) | $11.58 | ||||||||||||
| Valuation Ratios (Price Multiples) | |||||||||||||
| Price to earnings (P/E) | 25.29 | 73.54 | 31.75 | 34.79 | 37.49 | 15.02 | 29.61 | 40.65 | 103.23 | 53.56 | |||
| Price to next year expected earnings | 19.21 | 14,352.61 | 24.03 | 31.87 | 36.85 | 13.14 | 21.64 | 39.83 | 102.66 | 50.12 | |||
| Price-earnings-growth (PEG) | 0.80 | — | 0.99 | 3.80 | 21.54 | 1.05 | 0.80 | 19.72 | 184.24 | 7.80 | |||
| Price to operating profit (P/OP) | 19.59 | 32.47 | 25.30 | 27.30 | 29.62 | 12.74 | 19.22 | 29.43 | 41.36 | 33.68 | |||
| Price to sales (P/S) | 4.71 | 1.55 | 4.41 | 5.18 | 7.71 | 1.90 | 1.98 | 3.09 | 3.77 | 3.11 | |||
| Price to book value (P/BV) | 18.79 | 25.49 | 13.23 | 7.32 | 17.47 | 5.11 | 22.11 | 4.19 | 8.60 | 8.18 | |||
Based on: 10-K (reporting date: 2021-12-31).
If the company price multiple is lower then the price multiple of benchmark then company stock is relatively undervalued.
Otherwise, if the company price multiple is higher then the price multiple of benchmark then company stock is relatively overvalued.
Historical Valuation Ratios (Summary)
Illinois Tool Works Inc., historical price multiples
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).
Analysis of valuation ratios between 2017 and 2021 reveals a general expansion in market valuation multiples, punctuated by a significant contraction in 2018 and a peak across most metrics in 2020.
- Price to Earnings (P/E) and Price to Operating Profit (P/OP)
- The P/E ratio exhibited significant volatility, starting at 33.07 in 2017 and falling sharply to 18.46 in 2018. A subsequent recovery trend occurred through 2020, where the ratio reached 30.18, before moderating to 25.29 by the end of 2021. The P/OP ratio mirrored this trajectory, dipping to 13.20 in 2018 and peaking at 22.08 in 2020, suggesting a strong correlation between the market's valuation of net earnings and operating performance.
- Price to Sales (P/S)
- The P/S ratio followed a pattern similar to the earnings multiples, recording a period low of 3.20 in 2018. Valuation based on sales expanded steadily thereafter, reaching a five-year peak of 5.06 in 2020 and concluding the period at 4.71 in 2021.
- Price to Book Value (P/BV)
- The P/BV ratio demonstrated the most consistent growth of all analyzed metrics. The ratio increased from 12.17 in 2017 to a peak of 20.01 in 2020. This substantial expansion indicates a growing market premium attributed to the company's book value or an increase in the perceived value of intangible assets, ending the period with a slight correction to 18.79 in 2021.
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Price to Earnings (P/E)
Illinois Tool Works Inc., historical P/E 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$) | ||||||
| Net income (in millions) | 2,694) | 2,109) | 2,521) | 2,563) | 1,687) | |
| Earnings per share (EPS)2 | 8.61 | 6.66 | 7.91 | 7.81 | 4.94 | |
| Share price1, 3 | 217.72 | 200.98 | 187.86 | 144.21 | 163.36 | |
| Valuation Ratio | ||||||
| P/E ratio4 | 25.29 | 30.18 | 23.76 | 18.46 | 33.07 | |
| Benchmarks | ||||||
| P/E Ratio, Competitors5 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 16.82 | — | — | — | — | |
| Eaton Corp. plc | 27.77 | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | 23.14 | — | — | — | — | |
| Lockheed Martin Corp. | 16.70 | — | — | — | — | |
| RTX Corp. | 36.79 | — | — | — | — | |
| P/E Ratio, Sector | ||||||
| Capital Goods | 57.31 | — | — | — | — | |
| P/E Ratio, Industry | ||||||
| Industrials | 35.59 | — | — | — | — | |
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.
2 2021 Calculation
EPS = Net income ÷ No. shares of common stock outstanding
= 2,694,000,000 ÷ 312,926,939 = 8.61
3 Closing price as at the filing date of Illinois Tool Works Inc. Annual Report.
4 2021 Calculation
P/E ratio = Share price ÷ EPS
= 217.72 ÷ 8.61 = 25.29
5 Click competitor name to see calculations.
The financial data from 2017 to 2021 reflects a period of significant volatility in valuation multiples, characterized by a general increase in share price and fluctuating earnings per share. While the share price followed an overall upward trajectory from 163.36 US$ to 217.72 US$, the price-to-earnings (P/E) ratio did not move in a linear fashion, indicating shifting market sentiment and varying levels of earnings efficiency.
- Price-to-Earnings Ratio Volatility
- A sharp contraction in the P/E ratio is observed between 2017 and 2018, falling from 33.07 to 18.46. This decline was driven by a simultaneous decrease in share price and a substantial increase in earnings per share, which rose from 4.94 US$ to 7.81 US$. This suggests a period of valuation correction where earnings growth outpaced market price appreciation.
- Multiple Expansion and Decoupling
- Between 2019 and 2020, a trend of multiple expansion is evident. The P/E ratio rose from 23.76 to 30.18. Notably, this increase occurred in 2020 despite a decline in earnings per share from 7.91 US$ to 6.66 US$. The rise in the P/E ratio during a period of earnings contraction indicates that the share price continued to appreciate independently of immediate profitability, suggesting higher investor expectations for future growth or a broader market premium.
- Valuation Normalization
- By the end of 2021, the P/E ratio moderated to 25.29. This normalization was supported by a strong recovery in earnings per share, which reached a period high of 8.61 US$. Because the growth in earnings exceeded the growth in the share price during this interval, the valuation multiple compressed from its 2020 peak, aligning the stock price more closely with its fundamental earnings performance.
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Price to Operating Profit (P/OP)
Illinois Tool Works Inc., historical P/OP 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$) | ||||||
| Operating income (in millions) | 3,477) | 2,882) | 3,402) | 3,584) | 3,494) | |
| Operating profit per share2 | 11.11 | 9.10 | 10.67 | 10.92 | 10.23 | |
| Share price1, 3 | 217.72 | 200.98 | 187.86 | 144.21 | 163.36 | |
| Valuation Ratio | ||||||
| P/OP ratio4 | 19.59 | 22.08 | 17.61 | 13.20 | 15.97 | |
| Benchmarks | ||||||
| P/OP Ratio, Competitors5 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 15.87 | — | — | — | — | |
| Eaton Corp. plc | 19.33 | — | — | — | — | |
| GE Aerospace | 17.46 | — | — | — | — | |
| Honeywell International Inc. | 20.68 | — | — | — | — | |
| Lockheed Martin Corp. | 11.56 | — | — | — | — | |
| RTX Corp. | 28.68 | — | — | — | — | |
| P/OP Ratio, Sector | ||||||
| Capital Goods | 22.96 | — | — | — | — | |
| P/OP Ratio, Industry | ||||||
| Industrials | 22.38 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Data adjusted for splits and stock dividends.
2 2021 Calculation
Operating profit per share = Operating income ÷ No. shares of common stock outstanding
= 3,477,000,000 ÷ 312,926,939 = 11.11
3 Closing price as at the filing date of Illinois Tool Works Inc. Annual Report.
4 2021 Calculation
P/OP ratio = Share price ÷ Operating profit per share
= 217.72 ÷ 11.11 = 19.59
5 Click competitor name to see calculations.
The Price to Operating Profit (P/OP) ratio for the period between 2017 and 2021 exhibits significant volatility, characterized by a sharp decline in 2018 followed by a substantial expansion that peaked in 2020 before moderating in 2021.
- Share Price Trends
- A general upward trajectory in share price is observed after a brief contraction in 2018. The price moved from 163.36 US$ in 2017 to a low of 144.21 US$ in 2018, subsequently climbing to 217.72 US$ by the end of 2021, representing a total increase of approximately 33% over the five-year period.
- Operating Profit per Share Performance
- Operating profit per share remained relatively stable from 2017 to 2019, fluctuating between 10.23 US$ and 10.92 US$. A notable contraction occurred in 2020, where profit per share dropped to 9.10 US$, before recovering to a five-year peak of 11.11 US$ in 2021.
- P/OP Ratio Analysis
- The P/OP ratio decreased to 13.20 in 2018, coinciding with the dip in share price. A significant expansion of the multiple occurred between 2019 and 2020, with the ratio reaching its maximum of 22.08. This peak was driven by the simultaneous increase in share price and the decrease in operating profit per share. By 2021, the ratio contracted to 19.59, as the growth in operating profit per share outpaced the growth in share price, suggesting a normalization of the valuation multiple.
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Price to Sales (P/S)
Illinois Tool Works Inc., historical P/S 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$) | ||||||
| Operating revenue (in millions) | 14,455) | 12,574) | 14,109) | 14,768) | 14,314) | |
| Sales per share2 | 46.19 | 39.71 | 44.25 | 45.01 | 41.91 | |
| Share price1, 3 | 217.72 | 200.98 | 187.86 | 144.21 | 163.36 | |
| Valuation Ratio | ||||||
| P/S ratio4 | 4.71 | 5.06 | 4.25 | 3.20 | 3.90 | |
| Benchmarks | ||||||
| P/S Ratio, Competitors5 | ||||||
| Boeing Co. | 1.87 | — | — | — | — | |
| Caterpillar Inc. | 2.26 | — | — | — | — | |
| Eaton Corp. plc | 3.03 | — | — | — | — | |
| GE Aerospace | 1.50 | — | — | — | — | |
| Honeywell International Inc. | 3.73 | — | — | — | — | |
| Lockheed Martin Corp. | 1.57 | — | — | — | — | |
| RTX Corp. | 2.21 | — | — | — | — | |
| P/S Ratio, Sector | ||||||
| Capital Goods | 2.09 | — | — | — | — | |
| P/S Ratio, Industry | ||||||
| Industrials | 2.07 | — | — | — | — | |
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.
2 2021 Calculation
Sales per share = Operating revenue ÷ No. shares of common stock outstanding
= 14,455,000,000 ÷ 312,926,939 = 46.19
3 Closing price as at the filing date of Illinois Tool Works Inc. Annual Report.
4 2021 Calculation
P/S ratio = Share price ÷ Sales per share
= 217.72 ÷ 46.19 = 4.71
5 Click competitor name to see calculations.
The Price to Sales (P/S) ratio demonstrates a period of fluctuation followed by a valuation expansion between 2017 and 2021. While the ratio experienced an initial decline, it trended upward significantly through 2020 before stabilizing slightly in 2021.
- Share Price Performance
- A general upward trend in share price is observed after 2018, moving from 144.21 to 217.72 by the end of 2021. This growth reflects a strengthening market valuation over the latter half of the analyzed period.
- Revenue Efficiency per Share
- Sales per share displayed non-linear movement, characterized by a dip to 39.71 in 2020 and a subsequent recovery to a period high of 46.19 in 2021.
- P/S Ratio Dynamics
- The P/S ratio reached its lowest point of 3.20 in 2018 and its peak of 5.06 in 2020. The spike in 2020 is attributed to the divergence between a rising share price and a simultaneous contraction in sales per share.
The contraction of the P/S ratio from 5.06 in 2020 to 4.71 in 2021 was driven by a significant increase in sales per share, which offset the continued rise in share price. This suggests a realignment of the valuation based on improved revenue performance in the final year of the analyzed period.
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Price to Book Value (P/BV)
Illinois Tool Works Inc., historical P/BV 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$) | ||||||
| Stockholders’ equity attributable to ITW (in millions) | 3,625) | 3,181) | 3,026) | 3,254) | 4,585) | |
| Book value per share (BVPS)2 | 11.58 | 10.05 | 9.49 | 9.92 | 13.42 | |
| Share price1, 3 | 217.72 | 200.98 | 187.86 | 144.21 | 163.36 | |
| Valuation Ratio | ||||||
| P/BV ratio4 | 18.79 | 20.01 | 19.80 | 14.54 | 12.17 | |
| Benchmarks | ||||||
| P/BV Ratio, Competitors5 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 6.62 | — | — | — | — | |
| Eaton Corp. plc | 3.63 | — | — | — | — | |
| GE Aerospace | 2.64 | — | — | — | — | |
| Honeywell International Inc. | 6.91 | — | — | — | — | |
| Lockheed Martin Corp. | 9.62 | — | — | — | — | |
| RTX Corp. | 1.95 | — | — | — | — | |
| P/BV Ratio, Sector | ||||||
| Capital Goods | 4.77 | — | — | — | — | |
| P/BV Ratio, Industry | ||||||
| Industrials | 5.44 | — | — | — | — | |
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.
2 2021 Calculation
BVPS = Stockholders’ equity attributable to ITW ÷ No. shares of common stock outstanding
= 3,625,000,000 ÷ 312,926,939 = 11.58
3 Closing price as at the filing date of Illinois Tool Works Inc. Annual Report.
4 2021 Calculation
P/BV ratio = Share price ÷ BVPS
= 217.72 ÷ 11.58 = 18.79
5 Click competitor name to see calculations.
The period from 2017 to 2021 is characterized by a significant expansion of the Price to Book Value (P/BV) ratio, driven by a widening divergence between the market valuation of the shares and the company's accounting book value.
- Share Price Trends
- The share price exhibited a general upward trajectory, increasing from 163.36 US$ in 2017 to 217.72 US$ by the end of 2021. Although a decline occurred in 2018, where the price dropped to 144.21 US$, the subsequent three years showed consistent growth, with the price rising to 187.86 US$ in 2019, 200.98 US$ in 2020, and peaking in 2021.
- Book Value Per Share (BVPS) Dynamics
- A contraction in the book value per share was observed between 2017 and 2019, with values falling from 13.42 US$ to 9.49 US$. A recovery phase began in 2020, as BVPS rose to 10.05 US$ and further increased to 11.58 US$ by December 31, 2021. Despite this late-period recovery, the BVPS remained below the 2017 baseline.
- Price to Book Value (P/BV) Ratio Analysis
- The P/BV ratio experienced a steady increase for the majority of the period, rising from 12.17 in 2017 to a peak of 20.01 in 2020. This expansion indicates that the market attributed a higher premium to the company's assets over time, likely reflecting high returns on equity or significant intangible value not captured on the balance sheet. In 2021, the ratio declined slightly to 18.79, resulting from the increase in BVPS outpacing the growth in share price for that specific year.
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