Stanley Black & Decker Inc (SWK)

Conclusion

Stanley Black & Decker sells hand tools, power tools, outdoor equipment and industrial fasteners, with brands such as DEWALT, CRAFTSMAN and STANLEY. The shares closed at 118.10 USD on 2026-11-09, giving a market capitalisation of 17.84 billion USD.

The verdict is fair. The fair value band runs from 114.59 to 171.89 USD with a midpoint of 143.24 USD, a margin of safety of 21.3% at the current price. The DCF gives 146.46 USD per share, and the fair value from historical multiples is 140.02 USD. Today's multiples sit below their own ten-year medians: price to earnings is 21.2 against a median of 22.6, and enterprise value to EBITDA is 13.0 against 14.3. The reverse DCF implies growth of -0.1% a year, against revenue growth of 0.8% a year over five years. Earnings per share, however, has fallen 19.0% a year over five years, so the price assumes stability in a business whose profits have been shrinking.

Two numbers support the case. Free cash flow conversion over the last twelve months is 213.1%, and the share count has fallen 1.3% a year over five years. Two numbers weaken it. Five-year free cash flow conversion is only 14.2%, and return on invested capital of 10.0% barely exceeds the weighted average cost of capital of 9.9%.

Financial health

Financial strength is yellow: the current ratio of 1.42 is good, while net debt to EBITDA of 2.37, interest coverage of 3.86 and the Altman Z-score of 2.65 are neutral. The quick ratio is 0.47 and debt to equity is 0.53. Net debt to EBITDA is flagged as a watch item and interest coverage likewise. The Altman Z-score of 2.65 sits in the grey zone. The model was designed for manufacturers, and this company is one, so the reading applies directly. Insolvency risk is low, about 0.7% by the estimate of the Ohlson model over one to two years, based on figures as of 2025-12-31. The company's leverage is moderate rather than alarming, but its cushion against an earnings decline is limited, since a debt-to-EBITDA ratio above two leaves less room than a net-cash balance sheet would.

Earnings quality

Earnings quality is yellow: free cash flow conversion over the last twelve months (213.1%) and the share count reduction are good, while five-year free cash flow conversion (14.2%) is bad. The accrual ratio is -2.6%, which indicates cash earnings above reported earnings. Stock-based compensation is only 0.5% of revenue, leaving free cash flow after it at 1.71 billion USD. The Piotroski score is 6 of 9. The Beneish M-score is not available. The company beat earnings expectations in all eight of the last quarters, with an average surprise of 41.9%. Analysts raised their current-year estimates over the last 90 days by 0.9%, but cut next-year estimates by 0.9%. Free cash flow conversion over the last twelve months is strong, but a five-year average of 14.2% shows that this has not been a consistent pattern.

Profitability

Profitability is yellow, with all four measures neutral. The gross margin of 33.8% is just above its ten-year median of 33.2%. The operating margin of 9.6% is below its median of 11.8%, and the net margin of 5.5% is below its median of 6.8%. Operating margin stability is 0.32. Return on invested capital is 10.0% against a weighted average cost of capital of 9.9%, and the given difference is 0.1%, a thin margin over the cost of capital. Its five-year median is 4.7%, so recent returns are above the company's historical norm. Return on equity is 9.5%. The DuPont split for 2025 shows a net margin of 2.7%, asset turnover of 0.71 and an equity multiplier of 2.35, so leverage contributes more to the return on equity than either margin or asset turns.

Growth

Growth is yellow. Revenue compound growth is -3.7% over three years, 0.8% over five and 3.1% over ten. Earnings per share compound growth is -27.0% over three years, -19.0% over five and -7.5% over ten. Free cash flow per share fell 15.2% a year over five years and 2.3% a year over ten. Revenue has grown in six of the last ten years. The growth rate of earnings expected for next year is 12.6%, which is good, but it follows several years of decline and depends on a recovery that has not yet appeared in reported results. Revenue has been roughly flat over five years, and per-share results have fallen faster, because the share count reduction has not offset the drop in earnings.

Valuation

Valuation is yellow, with the verdict as its only signal, and the verdict is fair. Price to earnings is 21.2 against a ten-year median of 22.6, a premium of -6.4%. Enterprise value to EBITDA is 13.0 against 14.3, a premium of -8.8%. Price to free cash flow is 9.95 against 19.74, a premium of -49.6%. Price to sales is 1.17 against 1.56, a premium of -24.9%, and price to book is 2.02 against 2.39, a premium of -15.7%. The DCF gives 146.46 USD per share using a discount rate of 10.7% and a terminal growth rate of 2.5%. The terminal value makes up 46.8% of the DCF value. The fair value band runs from 114.59 to 171.89 USD, a margin of safety of 21.3%. The dividend yield is 2.8%, the forward yield is 3.2%, and the payout on free cash flow is 27.9%. The fair value figures are an order-of-magnitude estimate built on fixed assumptions, not a price target.

Risks

The main risk is that earnings keep falling. Earnings per share has declined 19.0% a year over five years, and if that continues, the apparent cheapness on enterprise value to EBITDA will not hold. Leverage is a second risk: net debt to EBITDA of 2.37 and interest coverage of 3.86 leave limited room if operating profit weakens. Thin returns are a third: return on invested capital of 10.0% is only 0.1% above the cost of capital, so a small fall in margins would push the company's returns below its cost of capital. Five-year free cash flow conversion of 14.2% also suggests that the recent strength of cash flow may not last. The Beneish M-score and the debt maturity schedule are not available, and the analysis does not include revenue by segment, so it cannot show which parts of the business are driving the trend.