Illinois Tool Works Inc. (ITW) Fair Value & PE Analysis
Industrial - Machinery · NYSE
Current Price
$284.25
PE Ratio (TTM)
25.7x
Intrinsic Value
$248.11
-14.6% margin of safety
What Is Illinois Tool Works Inc.'s Fair Value?
As of 2026-07-30, applying a 25.0x earnings multiple to Illinois Tool Works Inc.'s (ITW) earnings per share of $11.15 yields a fair value estimate of $248.11 per share, versus a market price of $284.25.
Fair value from earnings multiples is sensitive to the multiple you choose. Across the sensitivity grid the estimate spans $204.79 to $297.78. This is a relative estimate anchored to earnings, not a statement of fact. For a cash flow based view, see the intrinsic value estimate on the DCF page.
How the PE model works · Recalculate in PE mode · ITW intrinsic value (DCF view)
Is Illinois Tool Works Inc. (ITW) Overvalued?
At $284.25, ITW trades about 14.6% above its PE-based fair value estimate, a modest premium over the applied earnings multiple. Check whether earnings growth justifies the price.
COMPETITIVE MOAT
↑Decentralized Structure Drives Agility
ITW's decentralized structure allows its 80+ business units to operate with significant autonomy. This fosters rapid innovation and tailored customer solutions, creating a competitive edge.
↑Proprietary Product Innovation
The company consistently invests in R&D, leading to patented, high-performance products like those from Miller Electric. This innovation creates switching costs for customers reliant on these specialized solutions.
↑Enterprise Initiatives Enhance Efficiency
ITW's ongoing enterprise initiatives focus on operational excellence and cost reduction. These efforts improve margins and strengthen the company's financial resilience against market fluctuations.
INVESTMENT RISKS
↓Global Economic Slowdown
A broad global economic slowdown could reduce industrial demand across ITW's diverse segments. This would impact overall revenue and profitability.
↓Intensifying Competition
While ITW has strong product differentiation, increased competition could erode pricing power. Competitors may offer similar solutions, forcing margin concessions.
↓Supply Chain Disruptions
Ongoing global supply chain issues can affect ITW's ability to source raw materials and components. This could lead to production delays and increased costs.
Base case
ITW base case PE valuation
Intrinsic Value
$248.11
Margin of safety
-14.6%
Expected annual return
-2.7%
Base case assumptions: 3.1% annual earnings growth, 25x target PE, 10% discount rate, 5 year projection. Data as of 2026-07-30.
This base case uses default assumptions and is not financial advice. The fair value changes significantly when the target PE or earnings growth rate changes. Open the calculator to set your own assumptions and see the full sensitivity range.
Customize the ITW PE valuation
Adjust the target PE, earnings growth, and discount rate to see how the fair value and margin of safety for Illinois Tool Works Inc. respond.
Open PE 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 PE Stock Valuation Data
PE Ratio (TTM)
25.7x
PEG Ratio
n/m
Earnings Yield
3.92%
ROE (TTM)
101.7%
Revenue/Share (TTM)
$57.50
Dividend Yield
2.27%
Debt/Equity
3.35x
Frequently Asked Questions
What is the PE ratio of ITW?
The trailing twelve-month PE ratio of ITW reflects how much investors pay per dollar of Illinois Tool Works Inc.'s earnings. This metric is most useful when compared to Industrial - Machinery peers and the company's own historical range.
Is ITW overvalued based on PE ratio?
ITW's PE of 25.7x combined with a PEG ratio of -7.94 provides a growth-adjusted perspective. ITW has negative earnings, so its PE and PEG ratios are not meaningful here and cannot tell you whether the stock is over or undervalued. Keep in mind that PE-based valuation works best for profitable, mature companies — for high-growth or cyclical Industrial - Machinery, a DCF analysis may be more appropriate.
How do I value ITW stock using PE ratio?
To value Illinois Tool Works Inc. using PE: (1) Compare the current PE (25.7x) against the Industrial - Machinery median to assess relative pricing, (2) check the PEG ratio (-7.94) to adjust for growth expectations, (3) review the 5-year PE range to identify where the stock sits historically, and (4) estimate fair value by multiplying a target PE by forward EPS estimates. This relative approach complements DCF's absolute valuation.
What is the PEG ratio of ITW?
ITW's PEG ratio is -7.94, calculated by dividing the PE ratio (25.7x) by the expected earnings growth rate. Because ITW has negative earnings, its PEG ratio is not meaningful and should not be read as a sign of under or overvaluation. Note that PEG accuracy depends on the reliability of growth estimates.
Should I use PE ratio or DCF for ITW stock valuation?
PE ratio gives a quick relative read — how ITW is priced versus Industrial - Machinery peers. DCF provides an absolute value based on projected free cash flows. For ITW, with a strong ROE of 101.7%, both methods are worth using — PE for a market-relative check, DCF to stress-test whether fundamentals justify the price. Each method has blind spots: PE ignores capital structure and cash flow quality, while DCF is sensitive to growth and discount rate assumptions.
Learn More
- See ITW DCF Valuation → — Intrinsic value via Discounted Cash Flow analysis
- PE Methodology — Step-by-step guide to PE ratio stock valuation
- DCF Methodology — Guide to discounted cash flow analysis
- PE Ratio — Understanding the price-to-earnings ratio
- Intrinsic Value — How to evaluate stock fair value
Related PE Valuations
All Industrials valuationsP/E and DCF value ITW with different methods and assumptions, so the two conclusions can differ. Compare the DCF intrinsic value.
Price as of 2026-07-30. Financial data from Financial Modeling Prep (trailing twelve months) · Valuation methodology by Charlie Wang.
This is an estimate, not investment advice.