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3 Reasons ITW is Risky and 1 Stock to Buy Instead

By: StockStory

October 03, 2025 at 00:03 AM EDT

ITW Cover Image

Although Illinois Tool Works (currently trading at $260.73 per share) has gained 8.9% over the last six months, it has trailed the S&P 500’s 24.7% return during that period. This might have investors contemplating their next move.

Is now the time to buy Illinois Tool Works, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Is Illinois Tool Works Not Exciting?

We're swiping left on Illinois Tool Works for now. Here are three reasons there are better opportunities than ITW and a stock we'd rather own.

1. Core Business Falling Behind as Demand Plateaus

We can better understand General Industrial Machinery companies by analyzing their organic revenue. This metric gives visibility into Illinois Tool Works’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, Illinois Tool Works failed to grow its organic revenue. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Illinois Tool Works might have to lean into acquisitions to accelerate growth, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). Illinois Tool Works Organic Revenue Growth

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Illinois Tool Works’s revenue to rise by 3.6%. While this projection indicates its newer products and services will spur better top-line performance, it is still below average for the sector.

3. Recent EPS Growth Below Our Standards

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

Illinois Tool Works’s EPS grew at an unimpressive 6.2% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its flat revenue and tells us management responded to softer demand by adapting its cost structure.

Illinois Tool Works Trailing 12-Month EPS (GAAP)

Final Judgment

Illinois Tool Works isn’t a terrible business, but it doesn’t pass our quality test. With its shares trailing the market in recent months, the stock trades at 24.5× forward P/E (or $260.73 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at our favorite semiconductor picks and shovels play.

Stocks We Would Buy Instead of Illinois Tool Works

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.

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