Is Illinois Tool Works Inc. overvalued or undervalued?

As of 4 August 2025, the valuation grade for Illinois Tool Works Inc. has moved from expensive to very expensive, indicating a significant concern regarding its valuation. The company appears overvalued based on its current metrics, with a P/E ratio of 39, a Price to Book Value of 40.41, and an EV to EBITDA ratio of 30.83, all of which are notably higher than the industry averages.
In comparison to its peers, Illinois Tool Works Inc. has a higher P/E ratio than GE Aerospace, which stands at 136.79, and a lower EV to EBITDA ratio than Lam Research Corp. at 48.40. This suggests that while Illinois Tool Works Inc. is positioned in a competitive market, its valuation is not justified by its financial performance. Furthermore, the company's stock has underperformed relative to the S&P 500 across multiple time frames, with a 1Y return of 4.20% compared to the S&P 500's 17.14%, reinforcing the notion that the stock may be overvalued.