Illinois Tool Works

Methodology

Illinois Tool Works' diversified industrial products business generates relatively stable earnings across automotive, construction, and specialty equipment with moderate cyclicality. The company's decentralized operating model and focus on market-leading niches create consistent performance. This calculation works well given the diversification across end markets and disciplined operational approach driving steady earnings growth.

Methodology

ITW typically commands premium PEG ratios reflecting its operational excellence, consistent execution, and portfolio of market-leading specialty products. The company's margin expansion and capital allocation discipline justify higher multiples than typical industrials. Compare to other diversified industrials to assess whether ITW's decentralized model and niche focus warrant its valuation premium.

Methodology

ITW pays a meaningful dividend with dividend aristocrat status and decades of consecutive increases. The company balances dividends with substantial share buybacks as primary capital return mechanisms. PEGY is relevant given the consistent dividend growth, though the primary appeal remains steady earnings compounding through operational excellence and disciplined portfolio management.