3M's Transformation Uncertain: A Wait-And-See Approach

Oct. 01, 2024 4:27 AM ET3M Company (MMM) Stock1 Comment
Rafa F. Oliver, CFA profile picture
Rafa F. Oliver, CFA
706 Followers
(12min)

Summary

  • 3M is undergoing a challenging transformation with stagnant revenue, rising debt, and significant legal risks from PFAS litigation, leading to a 32% stock price decline since 2021.
  • Despite a strong global product portfolio and solid cash flow, current free cash flow is insufficient to cover dividends and share buybacks, raising concerns.
  • New CEO William Brown brings valuable experience but skepticism remains about his ability to drive a radical transformation, given past performance and substantial PFAS liabilities.
  • I estimate 3M's value at $125 per share, slightly lower than its current price, and recommend holding due to unclear recovery path.

Prague, Czech republic - May 22, 2017: 3M company logo on headquarters building

josefkubes

Context

3M (NYSE:MMM) is a global industrial conglomerate and has been a solid business based on three pillars: innovation and R&D, operational efficiency, and a diverse product portfolio with a global reach. Until 2018 the company has beaten the market (Figure 1). 3M

This article was written by

Rafa F. Oliver, CFA profile picture
706 Followers
Investing in high-growth opportunities across industries, employing a value investing approach that prioritizes robust business models and strategic foresight. Focusing on companies with the potential to profoundly influence the global landscape in the years aheadI primarily employ the discounted cash flow (DCF) valuation methodology, although I remain adaptable to various valuation techniques. Additionally, I leverage business model frameworks derived from institutions like Harvard Business School and other renowned universities for in-depth analysis. This approach ensures a comprehensive understanding of a company's intrinsic value and strategic positioning within its industry landscape, facilitating informed investment decisions with a focus on long-term growth potential and risk mitigation.Educational background: MBA IESE Business School, University of Navarra and chartered financial analyst with CFA Institute

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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