- Oops!Something went wrong.Please try again later.
Let's talk about the popular 3M Company (NYSE:MMM). The company's shares saw significant share price movement during recent months on the NYSE, rising to highs of US$177 and falling to the lows of US$158. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether 3M's current trading price of US$173 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at 3M’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is 3M worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 17% below my intrinsic value, which means if you buy 3M today, you’d be paying a fair price for it. And if you believe the company’s true value is $209.69, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, 3M’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What kind of growth will 3M generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. 3M's earnings over the next few years are expected to increase by 28%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in MMM’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on MMM, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing 3M at this point in time. Case in point: We've spotted 1 warning sign for 3M you should be aware of.
If you are no longer interested in 3M, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.com.