Illinois Tool Works Inc. (ITW) Intrinsic Value & DCF Valuation
Industrial - Machinery · NYSE
Current Price
$282.29
Intrinsic Value
$253.07
-11.5% margin of safety
What Is Illinois Tool Works Inc.'s Intrinsic Value?
As of 2026-08-21, the base-case DCF model estimates the intrinsic value of Illinois Tool Works Inc. (ITW) at $253.07 per share, compared with a market price of $282.29, a margin of safety of -11.5%. The base case assumes 3.7% annual free cash flow growth and a 10.0% discount rate.
Across the sensitivity grid the estimate spans $210.64 to $301.56. Intrinsic value is an estimate built on assumptions, not a fact. A higher discount rate or slower growth pushes the estimate down, while stronger cash flow growth lifts it.
How the DCF works · Recalculate with your own assumptions · What is intrinsic value?
Is Illinois Tool Works Inc. (ITW) Undervalued?
At $282.29, ITW trades about 11.5% above the base-case intrinsic value estimate, a modest premium. By this model the price sits within a normal band, though faster growth than assumed would change the picture.
COMPETITIVE MOAT
↑Diversified Industrial Segments
ITW operates across numerous niche industrial markets, reducing reliance on any single sector. This broad diversification provides resilience against sector-specific downturns.
↑Strong Brand Recognition & Loyalty
Established brands like Paslode and Miller Electric command significant customer loyalty. This recognition translates into pricing power and repeat business.
↑Operational Excellence & Efficiency
ITW's decentralized structure and focus on lean manufacturing drive efficiency. This allows for cost advantages and consistent profitability.
INVESTMENT RISKS
↓Economic Sensitivity of Industrial Demand
ITW's end markets are cyclical and tied to broader economic activity. A significant economic slowdown could reduce demand for its products.
↓Integration Risk of Acquisitions
While acquisitions are a growth strategy, integrating new businesses can be challenging. Failure to achieve synergies or operational alignment poses a risk.
↓Technological Disruption in Manufacturing
Advancements in automation and new manufacturing technologies could disrupt traditional product lines. ITW must continuously innovate to stay relevant.
Base case
ITW base case valuation
Intrinsic Value
$253.07
Margin of safety
-11.5%
Expected annual return
-2.2%
Base case assumptions: 3.7% annual growth, 10.0% discount rate, 27.8x exit multiple, 5 year projection. Data as of 2026-08-21.
This base case uses default assumptions and is not financial advice. The intrinsic value changes significantly when the growth rate or discount rate changes. Open the calculator to set your own assumptions and see the full sensitivity range.
Customize the ITW valuation
Adjust the growth rate, discount rate, and exit multiple to see how the intrinsic value and margin of safety for Illinois Tool Works Inc. respond.
Open DCF Calculator for ITWCompany Overview
Illinois Tool Works Inc. is a global enterprise specializing in the production and distribution of a wide array of industrial goods and specialized equipment. The company operates through seven distinct divisions: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products. The Automotive OEM division supplies plastic and metal components, various fastening solutions, and integrated assemblies for automobiles, light-duty trucks, and other industrial applications. Its Food Equipment segment delivers commercial kitchen appliances for washing, refrigeration, cooking, and food processing, alongside comprehensive kitchen exhaust, ventilation, and pollution control systems, and offers related maintenance and repair services. The Test & Measurement and Electronics unit manufactures and sells machinery, expendable supplies, and accompanying software designed for assessing materials and structural integrity, in addition to equipment and consumables critical for the creation of electronic subassemblies and microelectronic components. The Welding division focuses on arc welding apparatus, coupled with metal arc welding consumables and associated accessories. The Polymers & Fluids segment produces adhesives, sealing compounds, lubrication and cutting fluids, and various fluids and polymers intended for automotive aftermarket upkeep and cosmetic purposes. The Construction Products segment provides purpose-engineered fastening systems and comprehensive solutions for new housing, renovation projects, and commercial building industries. Lastly, the Specialty Products segment delivers machinery and supplies for beverage packaging, equipment and expendables for product identification and marking, and specialized components and fasteners for appliances. ITW's broad clientele encompasses sectors such as automotive original equipment manufacturers (OEMs) and their suppliers, the commercial food service industry, construction companies, general industrial enterprises, and the automotive aftermarket. The corporation distributes its offerings directly to industrial manufacturers and via an extensive network of independent distributors. Established in 1912, Illinois Tool Works Inc. is headquartered in Glenview, Illinois.
Financial Metrics — ITW Stock Valuation Data
Revenue/Share (TTM)
$57.50
FCF/Share (TTM)
$10.20
ROIC (TTM)
24.7%
ROE (TTM)
101.7%
P/FCF
27.8x
EV/EBITDA
19.4x
FCF Yield
3.60%
Debt/Equity
3.35x
Based on trailing twelve-month data, ITW shows a free cash flow per share of $10.20 and a ROIC of 24.7%, key inputs for stock valuation using the DCF method. The P/FCF ratio of 27.8x and FCF yield of 3.60% are important context metrics when evaluating ITW's stock valuation relative to peers.
Frequently Asked Questions
What is the intrinsic value of ITW?
Illinois Tool Works Inc. currently generates $10.20 in free cash flow per share. At the current price of $282.29, a DCF model would discount these cash flows at an appropriate WACC and apply a terminal growth rate to arrive at an intrinsic value. The result depends heavily on your growth and discount rate assumptions — a 1% change in WACC typically shifts the fair value estimate by 10-15%. In MiniValuator the model uses a single discount rate that you can edit directly, 10% by default, rather than a computed WACC.
Is ITW undervalued?
ITW trades at a P/FCF ratio of 27.8x with a free cash flow yield of 3.60%. This P/FCF is in a moderate range. However, whether ITW is truly undervalued requires comparing the DCF intrinsic value to the current market price and evaluating whether the margin of safety is sufficient for your risk tolerance.
How do I value ITW stock using DCF?
To perform a DCF valuation on Illinois Tool Works Inc.: (1) Start with the trailing free cash flow per share ($10.20) as the base, (2) project future FCF growth over 5-10 years based on Industrial - Machinery industry trends and company fundamentals, (3) apply a discount rate (WACC) reflecting ITW's risk profile — with a debt-to-equity of 3.35x, capital structure is an important factor, and (4) add a terminal value for cash flows beyond the projection period.
What is DCF valuation and how does it apply to ITW?
DCF (Discounted Cash Flow) estimates what a company is worth today based on its future cash generation. For Illinois Tool Works Inc., this means projecting how much free cash flow the company will produce over the next 5-10 years, shaped by Industrial - Machinery trends, then discounting those amounts to today's dollars. ITW's ROIC of 24.7% reflects how efficiently the company converts invested capital into profit.
How does WACC affect ITW stock valuation?
WACC (Weighted Average Cost of Capital) is the discount rate in a DCF model — it reflects the minimum return investors require. For ITW, with a debt-to-equity ratio of 3.35x, the capital structure directly influences WACC. A 1% increase in WACC typically reduces the intrinsic value by 10-15%. At an EV/EBITDA of 19.4x, the market's implied discount rate can be reverse-engineered for comparison. In MiniValuator you set this discount rate yourself as a single editable number, 10% by default, instead of computing a formal WACC.
Learn More
- See ITW PE Valuation → — Earnings-based stock valuation using PE ratio analysis
- DCF Methodology — Step-by-step guide to discounted cash flow analysis
- PE Methodology — Guide to PE ratio stock valuation
- WACC — Understanding the discount rate used in DCF
- Margin of Safety — How to evaluate downside protection
- Intrinsic Value — How to evaluate stock fair value
- How to Calculate Intrinsic Value — Complete guide for investors
Related Valuations
All Industrials valuationsDCF and P/E value ITW with different methods and assumptions, so the two conclusions can differ. Compare the P/E fair value.
Price as of 2026-08-21. Financial data from Financial Modeling Prep (trailing twelve months) · Valuation methodology by Charlie Wang.
This is an estimate, not investment advice.