| Not so often do companies hold such a vast array of | | | | Clearly 3M is growing and using good internal controls |
| businesses. Whoever thought companies could have a | | | | to reduce cost. |
| manufacturing, financial, and television segment but not | | | | Another way of illustrating 3M's strong growth is |
| succeed is wrong. The conglomerate industry is | | | | through its margins. Gross margins for 3M at 47.94% |
| diversified. Holding these companies through uncertain | | | | are quite high compared to the industry's average at |
| times illustrate strong investing knowledge. The current | | | | 39.01%. 3M's gross margins are also higher than United |
| state of the economy is a bit instable, so owning a | | | | Technologies' 26.78% figure, Emerson's 35.70% |
| company like GE is a good investment. However, | | | | number, and GE's 42.83% margin. In addition, 3M's |
| there are other companies in this industry. These | | | | operating margins at 28.04% are also above the |
| companies not only have a strong business model, but | | | | industry average at 15.24%, not to mention above the |
| they have excellent growth potential and solid | | | | rest of the industry's respective figures. The more |
| valuation. One of these companies is 3M (MMM). | | | | important margin, net profit margin, is also in favor of |
| Before examining the financial statements of 3M, it is | | | | 3M. The past fiscal year illustrated this figure at 18.61%. |
| vital to understand the variety of activities this | | | | The number is quite high compared to the company's |
| company performs. According to Reuters, 3M is a | | | | five year average at 14.70%. In addition, 3M's number |
| "diversified technology company with a global | | | | beats the industry average of 11.81%, United |
| presence in various businesses, including industrial and | | | | Technologies' figure at 8.10%, Emerson's margin at |
| transportation, healthcare, display and graphics, | | | | 9.29%, and GE's number at 12.88%. 3M is working very |
| consumer and office, safety, security and protection | | | | efficiently compared to its industry peers. It can use |
| services, and electro and communications." The | | | | the extra cents it makes for every dollar to help the |
| industrial and transportation business includes products | | | | company and investors. Capital spending over the past |
| such as food and beverage, personal care, and | | | | five years for 3M is growing at 3.57%. This number is |
| automobiles. More specific industrial products include | | | | higher than the industry average of 0.98% and higher |
| polyester, foil, and tape. Specific transportation | | | | than most of the aforementioned companies. Higher |
| products are insulation components like catalytic | | | | capital spending now means even more efficiency in |
| converters. The health care segment produces | | | | the future for 3M. Lower costs mean wider margins |
| supplies for medical, surgical, and dental use. The | | | | and a greater ability for 3M to buy back shares from |
| display and office business employs workers to | | | | investors or increase its dividend. |
| produce stationary products, supply products, and | | | | While 3M's growth looks excellent, some investors |
| home-improvement products. Office products like | | | | may question the company's valuation. According to |
| Post-it Memo Pads are also produced in this section. | | | | Reuters, the conglomerate industry has an earnings |
| 3M also controls a safety segment and an electro and | | | | multiple of 19.92. Fortunately, for investors wanting to |
| communications section, where the latter creates | | | | buy shares of this company, the forward P/E ratio for |
| products including telecommunication fiber-optic | | | | 3M is 18.99. This number is very similar to GE, Emerson, |
| products. | | | | and United Technologies. In addition, 3M's forward price |
| The main idea to take from the different business of | | | | to sales ration of 2.82 is also similar to the mentioned |
| 3M is the hedging strategy. Instead of focusing on only | | | | companies. This indicator illustrates that not only is 3M |
| one industry, 3M can have a section of its business | | | | growing quite strongly, but 3M is also undervalued |
| prosper, while another section's growth slows. It is true | | | | compared to its growth across this industry. High |
| that 3M may not experience any incredible share price | | | | growth and low valuation typically create a strong |
| appreciation because of its strategy, but 3M will not | | | | recipe for success. 3M's PEG ratio of 1.67 is near or |
| experience any dramatic share price fallout either. As | | | | below most of the industry competitors which again |
| evidence, since 1999, 3M has only had one distinct | | | | illustrates low valuation given growth. |
| negative share price calendar year (2005), and that | | | | In terms of other 3M strengths, this company is solvent |
| year only yielded a loss of 6%. Each year during this | | | | with a 1.28 current ratio. The company is owned by |
| timeline before and after 2005, 3M has been flat or | | | | more than 67% institutional investors. This indicates that |
| shown share price appreciation. In 2006 the share | | | | the smartest investors like this company and want to |
| price rose about 5%, and so far in 2007 the share | | | | take the risk to own it. The company's ROE of |
| price is up over 30%. Throughout this period, the US | | | | 39.97% is excellent. This number is above its five year |
| economy has been through exuberant growth to | | | | average of 33.31% and also above the industry |
| panicked recession. However, because of 3M's | | | | average of 20.97%. This number obliterates GE, United |
| strategy and investor's trust in such a well-respected | | | | Technologies, and Emerson's figures. And if higher |
| brand, 3M has managed to avoid so terrible economic | | | | margins continue to be present for 3M, future |
| periods. | | | | buybacks will lead to even increased returns. 3M's |
| While, 3M's business model is great, there are many | | | | ROA of 19.82% and ROI of 27.80% are also quite |
| other corporations in this industry that have similar | | | | strong. 3M is also very efficient when it comes to |
| strategies. What differentiates 3M however is its | | | | turnover. Receiver turnover at 6.99 beats the industry |
| fundamentals. Over the last fiscal year, according to | | | | average of 4.27 which means consumers pay their |
| Reuters, 3M saw revenue at $22.9 billion dollars. This is | | | | discounts or credit on average every 50 days. Asset |
| an outstanding number. What is more outstanding is | | | | turnover at 1.07 is also stronger than the industry |
| relative sales growth. 3M's recent sales figure was | | | | average of 0.53, which means 3M's asset moves |
| 7.86% higher than it was the previous fiscal year. Not | | | | usually mean larger sales. Overall, there are plenty of |
| only is this increase higher than its five year average, | | | | advantages to owning 3M and its fundamentals. |
| but it is also higher than the five year average of the | | | | Therefore, now would be an excellent time to think |
| conglomerate industry. Considering the size of sales | | | | about purchasing 3M shares. The dividend yield for this |
| volume, this is a great sign of growth. What is even | | | | company at 2.04% is very reasonable. In addition, |
| more outstanding is earnings growth. 3M has been | | | | technical indicators illustrate appreciating 50 day SMA |
| efficient with its costs and saw an increase in profits | | | | and EMA indicators coupled with an up trending |
| of over 32.76% last fiscal year. This number is higher | | | | Parabolic SAR. The recent cross over of SMA and |
| than the company's five year average at 23.13% and | | | | EMA a few weeks back indicates that 3M is ready to |
| also higher than the industry's average at 13.87%. | | | | rise and should enjoy higher share price appreciation |
| Comparing this figure to industry competitors, United | | | | until the lines converge. Therefore, given the |
| Technologies only saw a 13.72% increase during the | | | | fundamental, technical, and strategy analysis, there are |
| same time period, Emerson Electric saw a 20.26% | | | | plenty of reasons for investors to purchase shares of |
| increase, and GE only had profits grow by 12.16%. | | | | 3M as a part of a diversified portfolio. |