3M Co (MMM, Financial) recently experienced a daily gain of 3.6%, yet it faced a 3-month loss of -1.7%. With a reported Loss Per Share of $13.35, investors are keen to understand the stock's valuation. The pressing question is whether 3M Co (MMM) is modestly undervalued or not. In the following analysis, we will scrutinize the company's financials, market performance, and intrinsic value to provide a clear valuation picture.
Company Introduction
3M Co is a renowned multinational conglomerate with a rich history dating back to 1902. Originally known as Minnesota Mining and Manufacturing, the company has established a strong presence in research and development, leveraging its technological advancements across various product categories. Structured into four business segments, namely safety and industrial, transportation and electronics, healthcare, and consumer, 3M Co boasts a diverse product range that serves numerous consumers and end markets. With nearly half of its revenue originating from outside the Americas, the company's global footprint is substantial. A comparison between the current stock price of $103.44 and the GF Value of $140.76 suggests that 3M Co might be trading below its estimated fair value.
Summarize GF Value
The GF Value is a proprietary metric that assesses the intrinsic value of a stock by considering historical trading multiples, an adjustment factor based on past performance and growth, and future business performance projections. If a stock trades significantly above the GF Value Line, it may be overvalued with potentially poor future returns. Conversely, a price well below the line could indicate undervaluation and the prospect of higher returns. Currently, 3M Co's stock appears modestly undervalued, suggesting that its long-term return could outperform its business growth.
Financial Strength
Investors must consider a company's financial strength to mitigate the risk of permanent capital loss. Key indicators such as the cash-to-debt ratio and interest coverage can provide insights into this aspect. 3M Co's cash-to-debt ratio stands at 0.31, ranking it lower than 61.75% of its industry peers. With an overall financial strength score of 4 out of 10, 3M Co's fiscal health could be better, warranting cautious investment consideration.
Profitability and Growth
Profitability is a critical factor for investors, as consistently profitable companies typically pose less risk. 3M Co has maintained profitability over the past decade, with revenues of $32.70 billion in the last 12 months. Despite this, its operating margin of -28.59% is lower than 93.12% of its industry counterparts. Growth, another vital valuation component, is closely tied to long-term stock performance. 3M Co's 3-year average annual revenue growth is 3.2%, which is below the industry median. Its EBITDA growth rate of 5.2% also falls short when compared to industry standards.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) can further elucidate its profitability. Ideally, the ROIC should exceed the WACC to indicate value creation for shareholders. However, 3M Co's ROIC of -17.16 over the past 12 months is significantly lower than its WACC of 8.85, suggesting that the company is not generating adequate cash flow relative to its invested capital.
Conclusion
In summary, 3M Co (MMM, Financial) appears to be modestly undervalued, which may signal a favorable long-term investment opportunity. Despite its solid profitability track record, the company's financial condition raises concerns, and its growth ranks below many of its industry peers. Investors interested in 3M Co should conduct a thorough review of its 30-Year Financials to make an informed decision.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
