This Multinational Conglomerate Provides Safety and Growth
Ash is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
3M Company (NYSE: MMM) is a multinational conglomerate that produces more than 55,000 different products targeted at consumers and businesses and including car care products, medical products, materials and adhesives, to name a few.
3M operates in more than 65 countries and is a leader in many of those markets. The largest segment at 3M is the Industrial & Transportation department, which accounted for 33.5% of 2011 sales. Health Care made up 16.7% of business and the Graphics division rounded out the top three with 12.2% of sales.
3M employs close to 100,000 people worldwide in order to research, design and manufacture the products that they send to market. Research and development costs in 2011 were $1.6 billion, which at the time was 5.3% of sales.
The Bosses & Owners
George W. Buckley was recently replaced as chairman, president and CEO of 3M by Inge G. Thunlin. Thunlin has been in the position since Feb. 24, and in that time 3M has gained just under 6%, beating the S&P 500 by around 1%.
Insiders at the company own less than 1% of the current outstanding stock -- not surprising given the size and age of 3M. The largest shareholders at the time of writing are State Street, owner of 7.5% of the outstanding stock, and BlackRock, which owns 5.3% of the outstanding stock.
Is It Performing?
3M is a component of the Dow Jones, an index that it has beat over the past 10 years by close to 150%. Over the last year, the stock has also outperformed the Dow Jones by returning 18% to investors whereas index investors would have received 11%.
Over the last 10 years, sales at 3M have grown from $16.3 billion up to $29.6 billion -- that’s 81% sales growth, a good amount for such a large company. Over the same time period EPS has grown an incredible 138.4%.
The five year annual average sales growth is 5.25%, net income sits at 2.15% and dividends have grown 3.64%.
In terms of price ratios, 3M has a current P/E of 14.9, price/sales of 2.2 and price/book of 3.65.
Being in so many different fields, 3M has lots of competitors, probably thousands. General Electric (NYSE: GE) could be considered a relevant competitor to 3M in many fields, particularly in the Health Care and Consumer divisions.
Another publicly traded competitor to 3M is Harsco (NYSE: HSC). Harsco is another multinational conglomerate. They focus on industrial and engineered products and have many competing lines with 3M.
3M is so diversified that it would take back-to-back-to-back catastrophes for the company to suddenly fail. That said, there are many reasons as to why the company may have some troubles, or stumbles, along the way.
Europe is probably one of the bigger issues that 3M currently faces. The region has been in and out of troubles for years now. A permanent downturn in their economy may result in issues for 3M’s sales.
China is also slowing down in terms of growth and 3M has exposure to that economy. Like a slowdown in Europe, the same could be said for China.
3M has a hefty amount of debt on their books that could become a lot to handle if borrowing rates suddenly increase. I don’t really foresee this happening, you have to watch out for it nonetheless.
3M is a great company for the long-term investor. I think that it is slightly above fair price as of right now but a buy into the company around $90 per share should be great for anyone not looking for a quick flip.
The 3M dividend yield is currently 2.5% and like mentioned earlier in the post, this rate is growing. I think the yield is great for a company of 3M’s stature.
Ash1402 has no positions in the stocks mentioned above. The Motley Fool owns shares of General Electric Company. Motley Fool newsletter services recommend 3M Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!