Stock (Symbol) |
3M (MMM) |
Stock Price |
$176 |
Sector |
| Food & Necessities |
Data is as of |
| September 12, 2016 |
Expected to Report |
| Oct 25 |
Company Description |
 3M Company operates in five business segments: Industrial, which serves a range of markets, such as automotive original equipment manufacturer (OEM) and automotive aftermarket, electronics, appliance, paper and printing, packaging, food and beverage, and construction; Safety and Graphics, which serves a range of markets for the safety, security and productivity of people, facilities and systems; Electronics and Energy, which serves customers in electronics and energy markets, including solutions for electronic devices, telecommunications networks, electrical products, power generation and distribution, and infrastructure protection; Health Care – markets that include medical clinics and hospitals, pharmaceuticals, dental and orthodontic practitioners, and health information systems, and Consumer, which serves markets that include consumer retail, office retail, home improvement, building maintenance and other markets. Source: Thomson Financial |
Sharek’s Take |
 At first, I looked at this spreadsheet and wondered why I’m even following 3M (MMM). But it is a quality stock with a high safety rating, 9% estimated long-term growth rate plus a 3% dividend that’s increased every year since 1959. It’s a very sound and stable stock. Known for Post-It notes, Minnesota Mining and Manufacturing got its roots in selling sandpaper, and made its first sale in $1906 for $2 — four years after the company was founded. In 1925 Scotch tape was invented, Scotchgard was first sold in 1956, and Thinsulate thermal insulation was introduced in 1979. It 1980 the yellow Post-It note came to market. The issue I have is this stock sold for 14-15 times earnings for MANY years and now sells for 21 times earnings. In fact if you look at the Profit History table MMM’s median annual P/E was 14 or 15 EVERY YEAR from 2006 through 2012. NOW the P/E is 21 even though profits are expected to climb just 8% this year. Long term, the Ten Year Chart shows profits have grown 5% a year the past decade while the stock rose 9% a year. These two numbers are usually more in-line with each other, thus I feel MMM should come down. I feel MMM is overvalued, and unless the investment account is a long-term conservative trust you should forget about this stock until the stock or the P/E comes down 20%. |
One Year Chart |
 Last qtr 3M delivered 3% profit growth on 0% sales growth. The company made $2.08 for the qtr, a penny over estimates that were reduced by 4 cents, 9 cents and 4 cents the previous qtrs. Oh, next qtrs estimate also got reduced 4 cents and now just 4% growth is expected. Still, profit growth estimates for the next 4 qtrs look decent: 4%, 17%, 3% and 10%. With a $10 billion buyback program in place, MMM is getting a lot of EPS growth by buying back shares, not really by growing sales. |
Fair Value |
 It’s very odd that this stock had the same P/E for so many years. I wish I would have purchased 3M for my conservative investors back then as 14x earnings seems like a great price for this stock. Now the P/E is 21 and I feel that’s because investors have flooded into safe stocks. |
Bottom Line |
 3M has had a solid decade as its gone from $75 to $175. But right now the P/E is so high it’s not even worth thinking about buying. My guess is this stock will come down over the next year as investors move funds from value stocks to growth stocks. MMM is on my radar for the Conservative Growth Portfolio, but right now is really only appropriate for large trust funds that demand the highest safety in their stock holdings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
