Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Illinois Tool Works Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 3.3% to 2.6% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 73, DPO 22, DIO 70). At a 8.5% WACC with mid-year discounting, the terminal value (83% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 18.7x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $248.93 per share, suggesting ITW is fairly valued by 4.9% at the current price of $261.81.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 3,930 | 4,065 | 4,199 | 4,383 | 4,499 | 4,611 |
| (−) Net Interest | 263 | 272 | 281 | 293 | 301 | 308 |
| (+) D&A | 404 | 430 | 435 | 435 | 442 | 453 |
| EBITDA | 4,596 | 4,766 | 4,914 | 5,111 | 5,242 | 5,373 |
| (−) Tax | 837 | 866 | 894 | 934 | 958 | — |
| (−) CapEx | 425 | 439 | 454 | 474 | 486 | — |
| (−) ΔWC | 215 | 158 | 156 | 215 | 135 | — |
| Free Cash Flow (FCF) | 3,119 | 3,303 | 3,410 | 3,489 | 3,662 | — |
| Peers' EBITDA Multiple | 18.7x | |||||
| Terminal Value | 100,685 | |||||
| WACC / Discount Rate | 8.48% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 2,995 | 2,923 | 2,782 | 2,624 | 2,539 | 67,018 |
| Enterprise Value | 80,882 | |||||
| Projection Period | 13,863 | 17.1% | ||||
| Terminal Value | 67,018 | 82.9% | ||||
| (−) Current Net Debt | 8,118 | |||||
| Equity Value | 72,764 | |||||
| (÷) Outstanding Shares | 292M | |||||
| Fair Price | $249 | -4.9% | ||||
| WACC \ EV/EBITDA Exit Multiple | 14.7x | 16.7x | 18.7x | 20.7x | 22.7x |
|---|---|---|---|---|---|
| 6.5% | $220 | $247 | $273 | $300 | $327 |
| 7.5% | $210 | $235 | $261 | $287 | $312 |
| 8.5% | $200 | $224 | $249 | $273 | $298 |
| 9.5% | $191 | $214 | $238 | $261 | $284 |
| 10.5% | $182 | $205 | $227 | $249 | $272 |
Current price: $261.81. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 5-year projection period. Revenue, expenses, D&A, and working capital are projected using the same line-by-line approach as the Growth Exit models. The key difference is the terminal value methodology: instead of assuming perpetual cash flow growth, the terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 6 EBITDA.
Using a peer exit multiple anchors the terminal value to how the market currently prices comparable companies, rather than relying on a theoretical perpetual growth assumption. This approach captures relative valuation dynamics and is particularly useful when a company is expected to converge toward industry-average profitability over time. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.