Breaking News
Get 40% Off 0
👀 Reveal Warren Buffett's stock picks that are beating the S&P 500 by +174.3% Get 40% Off

3M: Is Enough Finally Enough for the Industrial Giant? 

By Investing.com (Thomas Monteiro)Stock MarketsJun 26, 2023 09:17AM ET
www.investing.com/analysis/3m-is-enough-finally-enough-for-the-industrial-giant-200639383
3M: Is Enough Finally Enough for the Industrial Giant? 
By Investing.com (Thomas Monteiro)   |  Jun 26, 2023 09:17AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
MMM
-0.27%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
  • 3M's growth trajectory was hindered over the past decade due to liability issues
  • The recent $10.3 billion settlement brings some positivity for 3M investors.
  • Despite challenges, 3M still shows potential for upside based on its fundamentals.
  • InvestingPro Summer Sale is on: Check out our massive discounts on subscription plans!

When I first started investing in stocks back in 2013, 3M (NYSE:MMM) was my first purchase. The Minneapolis, Minnesota-based industrial giant had everything I looked for in a stock: an internationally recognizable brand, strong fundamentals, low volatility, and a hefty dividend yield with solid growth for over 50 years.

For five years, I just sat and watched the stock grow a solid 150% while receiving another 6% safe yearly dividend on top of it. Sure, it wasn't Apple-like growth, but neither was I looking for emotion.

But then something snapped, and 3M's growth trajectory changed for good. The company got caught in an endless stream of liability, damaging its reputation and balance sheet, ultimately erasing a decade of gains—which so happens to be one of the decades of more significant growth for U.S. stocks.

The stock now trades at the level I first bought it in 2013.

MMM Monthly Chart
MMM Monthly Chart
Throughout the course of the 3M's long bear market, I managed to sell my positions at an average of $170/share, far from the stock's $250 top but still much better than the current ~$100 price.

However, last week, 3M investors finally got one positive breakthrough: the company reached a $10.3 billion settlement for its 'forever chemicals' suit.

With the stock running at a very interesting 10.2 PE with solid profitability, the question running through investors' minds is: is enough finally enough for the industrial giant?

MMM Overview
MMM Overview
Source: InvestingPro

To answer that question, let's dive into 3M's fundamentals and the company's latest news with InvestingPro.

By the way, InvestingPro is currently hosting its Summer Sale, offering massive discounts on subscription plans. This is your chance to access cutting-edge tools, real-time market analysis, and expert opinions at a fraction of the price.

Enjoy incredible discounts on our subscription plans:

  • Monthly: Save 20% and get the flexibility of a month-to-month subscription.
  • Annual: Save an amazing 50% and secure your financial future with a full year of InvestingPro at an unbeatable price.
  • Bi-Annual (Web Special): Save an amazing 52% and maximize your profits with our exclusive web offer.

'The Solution to Pollution Is Dilution'

Back in the 70s, 3M executives would famously quote the above sentence to sweep their problems under the rug—or rather, to dilute them in the water. But then came the 2010s, and things didn't turn out to be quite like that, as the company got caught in a plethora of legal actions.

In fact, the knowledge of 3M's board of directors of the company's polluting past has led to an additional shareholder lawsuit against the board of directors—which I participated in.

On top of those cases, 3M is also battling the largest mass tort in U.S. history due to allegedly providing ineffective earplugs to the U.S. military, damaging the hearing of hundreds of thousands of combat soldiers. According to Reuters, the case has 330,000 cases filed and approximately 260,000 pending cases.

In a recent negative decision for 3M, U.S. Bankruptcy Judge Jeffrey Graham rejected the company's effort to resolve the lawsuits by filing for bankruptcy of its subsidiary, Aearo Technologies—which 3M claims to be the actual maker of the allegedly defective earplugs.

However, as the 'forever chemicals' lawsuit appears to be nearing an ending, investors begin to wonder if 3M's liability is a 'forever problem' for the 121-year-old company.

Let's take a look at the company's financials for more clues to that question.

Is 3M Undervalued?

To flatly answer the question above from a strictly fundamental point of view, yes—especially in a market that's beginning to show signs of exhaustion after jumping this year.

According to InvestingPro's 15 models, the stock has a potential 35.7% upside potential in the next few months with low uncertainty.

MMM Fair Value
MMM Fair Value

Source: InvestingPro

Furthermore, the company is trading further away from its 52-week high with a greater beta than its sector peers, implying that it would likely rise faster and further in an uptrend.

MMM Against Peers
MMM Against Peers

Source: InvestingPro

Moreover, the Minnesota-based company is way ahead of the competition in gross profit, net income margin, return on invested capital, and return on assets.

MMM Profitability Vs. Peers
MMM Profitability Vs. Peers

Source: InvestingPro

As InvestingPro data shows, the company has also been growing its free cash flow yield while keeping leveraged cash flow significantly low, implying financial resilience against a macroeconomic crisis, such as a potential incoming recession.

MMM Free Cash Flow Yield
MMM Free Cash Flow Yield

Source: InvestingPro

However, as a consequence of the legal battles, 3M's debt to total capital has been on a steady uptrend for the past decade.

MMM Debt & Financial Leverage
MMM Debt & Financial Leverage
Source: InvestingPro

The company's growing debt, combined with its slowing price momentum, has led to a low financial health score on InvestingPro.

MMM Financial Score
MMM Financial Score
Source: InvestingPro

However, liability aside, 3M has more upside than downside potential, according to InvestingPro.

MMM Stock Overview
MMM Stock Overview

Source: InvestingPro

Furthermore, despite the declining revenue trend—primarily due to the macroeconomic environment—3M posted better-than-expected figures on its latest earnings report.

3M Earnings Chart
3M Earnings Chart
Source: InvestingPro

That's mainly because the cost of revenue has been trending much lower—mainly due to the company's cost-cutting initiatives, mainly in place since last year.

MMM Cost of Revenue
MMM Cost of Revenue

Source: InvestingPro

On the technical side, the stock is currently sitting at its 50-day moving average, and a move lower would likely create a safe entry point.

MMM Against DMAs (50 and 200)
MMM Against DMAs (50 and 200)
Source: InvestingPro

Bottom Line

From a fundamental perspective, 3M should be trading at much higher levels than it currently is—even despite the growing damage to its balance sheet incoming from legal liability.

Moreover, it appears safe to bet that the 120-year-old company will survive this dark period in its history and see better days again in the future.

The question lies in which levels are worth buying the stock in the face of its continuous risks. I would say anything below 95$ could be worth a try, with sub-$85 prices indicating a downright buy.

Maybe enough isn't yet enough for 3M, but fundamentals indicate that we are getting very close to that.

***

Don't miss this limited-time opportunity to access cutting-edge tools, real-time market analysis, and the best expert opinions.

Join InvestingPro today and unleash your investment potential. Hurry, the Summer Sale won't last forever!

Summer Sale Is Live!
Summer Sale Is Live!

Disclosure: As of this writing, the author doesn't own any positions in 3M. He may consider buying the stock at the levels mentioned in this report.

3M: Is Enough Finally Enough for the Industrial Giant? 
 

Related Articles

3M: Is Enough Finally Enough for the Industrial Giant? 

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (9)
Sabuj Kumer Mondol
Sabuj Kumer Mondol Jun 29, 2023 12:20PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Sabuj Kumer Mondol
Sabuj Kumer Mondol Jun 29, 2023 12:20PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Jun 27, 2023 6:45AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I bought it at 97$. I think the products are good and the brand is well known. Well I don't know about the earplugs.. I will keep it forever unless more cases emerge.
Thomas Monteiro
Thomas Monteiro Jun 27, 2023 6:45AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Yeah, that looks like a bargain to me. Still, it's all about the earplugs case now.. Let's just hope that the worse is behind.
Jun 27, 2023 6:45AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Yes and thank you for your article. I've been wanting to buy 3M for like a year now. Now I just hold it, it was a long wait. Sure ain't looking back now.
Thomas Monteiro
Thomas Monteiro Jun 27, 2023 6:45AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
 Thank you for the read! I'm also looking for an opportunity and will likely buy it for the long haul again soon.
Alvin Diaz
Alvin Diaz Jun 26, 2023 12:42PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
It’s an interesting discussion and I reckon it will pay off at some point. I know it is still very hard to take the risks with the earplugs case building up, but 3M is bigger than all of this.
Thomas Monteiro
Thomas Monteiro Jun 26, 2023 12:42PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I agree!
Jason Rohlik
Jason Rohlik Jun 26, 2023 11:26AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
crap company and crap place to work
Alvin Diaz
Alvin Diaz Jun 26, 2023 11:26AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I have a long professional experience with 3M. I would never call it a bad place to work.
Crim Jamer
Crim Jamer Jun 26, 2023 10:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Good writing, way to go!
Thomas Monteiro
Thomas Monteiro Jun 26, 2023 10:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank you!
Thomas Monteiro
Thomas Monteiro Jun 26, 2023 10:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank you!
Bubba Born
Bubba Born Jun 26, 2023 10:36AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Took a bath on this one. Lawyers destroyed this company.
Thomas Monteiro
Thomas Monteiro Jun 26, 2023 10:36AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Well, some would argue the board of directors did. Either way, I don’t think 3M is done. Still an industrial giant and will eventually bounce back IMO.
Nourane Aleyan
Nourane Aleyan Jun 26, 2023 10:27AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I consider to buy it thanks !!!
Thomas Monteiro
Thomas Monteiro Jun 26, 2023 10:27AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Beware of the risks, though!
Permabear Strikes Again
Permabear Strikes Again Jun 26, 2023 8:08AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Good article. Still not buying it though!
Thomas Monteiro
Thomas Monteiro Jun 26, 2023 8:08AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Yeah, it’s a though call.
Gustavo Romanini
Gustavo Romanini Jun 26, 2023 5:26AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Great article! Thank you.
Thomas Monteiro
Thomas Monteiro Jun 26, 2023 5:26AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks for reading it!
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email