Amazon.com, Inc. (AMZN) vs Illinois Tool Works Inc. (ITW): Which Is the Better Buy in 2026?
As of 2026-08-03, AMZN is overvalued at $272, with a DCF intrinsic value of $99 and a margin of safety of -176%. ITW is overvalued at $287, with an intrinsic value of $201 and a margin of safety of -43%. Of the two, ITW has the wider margin of safety.
Rewards
- ★Each dollar of retained earnings has created $5.34 of earning power — management is an exceptional capital allocator.
- ★Trailing P/E of 21.8x is 46% below the historical average of 40.6x — potentially undervalued relative to its own history.
- ★Altman Z-Score of 5.30 indicates very low bankruptcy risk — the company is firmly in the safe zone.
- ★Illinois Tool Works Inc. has maintained ROIC above 15% for 4 consecutive years, indicating a durable competitive advantage.
- ★Illinois Tool Works Inc. scores 95/100 on the Economic Moat Score (Wide Moat), with roic consistency as the strongest competitive dimension.
- ★Free cash flow has grown at a 11.8% CAGR over the past 4 years, demonstrating strong earnings power growth.
Risks
- ⚠FCF yield of 0.3% is below 3%, meaning the market is pricing in substantial future growth to justify the current price.
- ⚠9 insider sales totaling $20.3M with no purchases in the past 3 months — insiders are reducing their exposure.
- ⚠Each dollar of retained earnings has produced only $0.08 of earning power — shareholders may have been better served by dividends.
- ⚠PEG ratio of 2.86 indicates the stock is expensive relative to its expected growth — the market may be pricing in more growth than analysts project.
- ⚠High leverage (3.06x net debt/equity) combined with thin interest coverage (-1.0x) poses financial risk.
Key Valuation Metrics
Learn more →Historical Fundamentals
Learn more →Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
$1 Retained Earnings Test
Learn more →> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Buffett's "$1 Test": For every $1 of earnings retained, has management created at least $1 of market value?
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Discounted Cash Flow (DCF) Analysis
Learn more →Reverse DCF — Market-Implied Growth
Learn more →What growth rate is the market pricing in at $272?
The market implies +16.9% Owner Earnings growth, below historical trends — potential opportunity.
Standard FCF implies a more demanding +50.5%, reflecting heavy growth investment expected to generate future returns.
Requires positive FCF to compute implied growth rate.
Economic Moat Score
Learn more →Narrow moat with revenue predictability as the key competitive advantage. Improving margin stability would strengthen the moat.
Wide moat with strength across all dimensions. ROIC Consistency is the standout factor.
Forensic Accounting
Learn more →M-Score Trend
M-Score Trend
Beneish's 8-variable model estimates the probability of earnings manipulation. An M-Score above -1.78 signals elevated risk — companies in this range have historically been 3-5× more likely to be manipulating earnings. Scores between -2.22 and -1.78 fall in a grey zone warranting further investigation.
Ownership Breakdown
Learn more →High insider ownership aligns management incentives with shareholders. Institutional concentration can indicate smart-money conviction but also crowding risk.
Insider Buying Activity
Learn more →Open market purchases · includes direct & indirect ownership · excludes option exercises.
Insider Selling Activity
Learn more →Direct ownership only · excludes indirect, option exercises, planned (10b5-1) sales & derivatives.
🎭 Mr. Market's Mood
Learn more →"Market is optimistic — be cautious and ensure you have a margin of safety"
"Market is optimistic — be cautious and ensure you have a margin of safety"
Composite sentiment score based on market signals. Inspired by Buffett’s "Mr. Market" allegory — fear = potential opportunity, greed = potential risk. Must be used alongside fundamental analysis, not in isolation.
⚖️ Buffett Signal
Learn more →The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
Frequently Asked Questions: AMZN vs ITW
Is Amazon.com, Inc. or Illinois Tool Works Inc. more undervalued in 2026?▼
Based on our discounted cash flow model, ITW trades at a -42.9% margin of safety (intrinsic value $201 vs. price $287), compared to AMZN's -175.5% margin of safety (intrinsic $99 vs. $272).
Which stock has a wider economic moat, Amazon.com, Inc. or Illinois Tool Works Inc.?▼
ITW scores 95/100 (Wide moat), while AMZN scores 51/100 (Narrow moat). The moat score measures competitive advantage durability across ROIC consistency, margin stability, revenue predictability, and reinvestment efficiency.
Which stock has higher return on invested capital, Amazon.com, Inc. or Illinois Tool Works Inc.?▼
ITW earns 27.6% ROIC versus AMZN's 10.4%. A higher ROIC means the company generates more profit per dollar of capital employed, a hallmark of durable competitive advantage in Buffett-style analysis.