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  • 3M Stock Analysis (buy or sell)

TRANSCRIPT:

Justin (00:00): Lots of you guys have been asking for a 3M stock analysis, and in this video, I'm going to break down the stock and give you a price prediction for the next 12 months. If you are new to this channel, we discuss, dissect saving, investing and wealth creation from a practical perspective. So, if you would like more on that, please consider clicking the subscribe button now, and while you there, make sure you turn on all notifications for this channel by hitting the bell icon. So, practically everyone knows about 3M. From adhesives and tapes to safety equipment, it's hard not to know who they are, but 3M had suffered a significant price hit on their stock like many other well-known companies. Right now, pre-COVID is like ancient history, and honestly, nobody knows what post-COVID is going to look like. But if one thing is certain, the markets will move, and they will continue to move. So, with that said, let's take a look at the fundamental analysis around the 3M stock. 


(00:56): So, diving into the analysis, I will give you guys a very quick rundown of my fundamental analysis. I'll try and make this as fast as possible since I know that your time is valuable, and you want to get to the meat of things. So, if we look at the stock, it's coming off a previous high in 2019 March, of $215. Currently, the stock is sitting at $165, so there's a lot of difference there. Then if we go to the previous high before that, that was in 2018, the stock was trading at $258. So, there is a lot of movement in the price over the last two years, especially hard hit during this COVID period, so the pandemic has definitely affected. That having been said, I'm always looking for companies that have a good history of dividend pay-outs, that have a long-standing history, that are currently undervalued. And if we go and have a look at 3M, the price of this stock less than a decade, ago 10 years, was sitting at half the price it is right now. So, definitely, there's been a lot of growth, and if we have a look at the stock over the last 50 years, it has had a consistent dividend pay-out history, and that, for me, is another big thing to have a look at. 


(02:13): So, if we're currently looking at the P. E. ratio, it’s sitting below 20. which definitely indicates that the company's value is probably at 19PE. It is probably more or less sitting at what the company's worth. There's not too much sentiment behind the stock right now, and that's understandable considering the current situation that we're in. The market cap is currently sitting at 19.4 billion, dividend yield of 3.5%. And, if we go and have a look at just some of the other things that are always worth looking at, we try and have a look at total revenue over sort of a three-year period, is it up or is it down, we can see, it is up slightly, but a little bit inconsistent, and pretty much the same goes for the cash flow statement. We look at cash flow from operations versus cash flow from other areas. Sort of, very much, you know, not to make up a word but very “pandemicy” right now. So you know, very much hinging around what's going on in the world, and very much a situation where external factors are really pushing the company. Now that having been said, we want to go and see if there is value in the stock. We want to go to the 12-point checklist that I have, and look at the 12-point checklist and determine is the stock a buy, is a time to climb in on the stock, is it a time to hold the stock or is it a time to ditch the stock if you're holding it. 


(03:29): So, I'm quickly going to head over to my spreadsheet. As you guys know, I have a 12-step checklist, and I'm basically looking to make sure that the stock meets most of these. If it does, then obviously, we put it into a certain buying category, and then we sort of determine whether the stock is worth going in on. So, P. E. ratio below 20, that's a good sign. Profit margin still up 10% plus, really good, assets are greater than liabilities. Where the company's falling short at the moment is its total revenue, gross profit, operating income, and net income has been inconsistent for the last three years. And, again, not to make up words, but the “pandemicy” stage of things is really influencing the stock quite drastically. Then if we go and have a look at cash from operating activities, it is up over the last three years. Free flow cash is up, so those are also really, really good. It means that the company is being managed well. Things are being managed very efficiently during the pandemic. That’s a good sign. And, then obviously, we want to make sure that the cost of the dividend, in other words, the amount of money they're paying out on the dividend, is less than their free cash flow. In other words, cash flow from operations, the actual products and things that they produce, versus a capital expenditure equals your free cash flow. And we want to know that they have got more cash flow than they're paying out in dividends. In other words, they're not using debt to go and pay out their shareholders. 


(04:53): So, if we have a look at the calculations here, we can see that the dividend payout is 3.35 billion, and that is 3% on 94 billion market cap, and we can see that free cash flow was 6.3 billion. So, they got double the amount of free cash flow than what they paid out in dividends. That's a healthy sign. I think, you know, considering where we at right now. That is definitely right up there for a lot of companies. And then obviously, I want to have a look at the share price and make sure this is a share that is at least double in value over the last decade. So, we want to know that there has been growth, and then we are looking right now at the stock and saying what the buy score is and the sell score. So, the short-term buy score in the next 12 months is 61%; the short-term sell score is 30%. So, this stock is, in my opinion, worth owning. Now having said that, I don't currently own it, but I think I'm going to jump in, and I think I am going to buy a large chunk of stock. This is not a significant growth stock, it's not going to double your money, but what it is going to do, it's going to give you access to a stock that is highly undervalued right now. It is going to provide you with access to that dividend pay-out, and it's going to allow you to ride the wave when the stock eventually goes back up over time and reaches its all-time high and then surpasses it. How long that will take is anybody's guess. 


(06:16): Having said that, the current market price $165 the industry is projecting 174. Now, there are a lot of determining factors that can go into these price predictions. A lot of this is based on fundamentals. A lot of it is based on market conditions. Nobody knows what the world is going to look like post-COVID. Nobody knows what it's going to look like, you know, in the next 12 months realistically. Nobody can predict, but one thing is certain, I believe 3M is in the right space. Besides adhesives and tapes and things, they're into safety equipment, and now they're making huge strides in terms of PPE equipment. So, for that reason, I'm going to conservatively project this price to at least $185 in the following market cycle. By this time next year, I predict 3M is going to be at least $185. And whilst that growth isn't extremely sexy coming off $165, I do believe there is a lot of value in holding an aristocrat share, and 3M is an aristocrat share. It is one of those shares that has paid out consistent dividends for 50 years. And for this reason, it has to, has to be in your portfolio at some point. Now, I haven't pulled the trigger yet, but I am going to pull the trigger. I’m waiting for one or two minor little corrections within this week, and then I'm going to jump in, and I'm going to start buying large blocks of 3M. 


(07:40): So if you're interested in following my portfolio, you're welcome to go to eToro, you can check out my profile, Justin Harrison 21, and you can follow me there. You'll see when I start buying the stock, and I hope that you at least found some value in this analysis. Thank you for watching this video. If you found value in the content, please hit the like button now because your likes on our videos tell YouTube that our content is worth ranking. And, while you there, let me know in the comment section below if you currently hold 3M stock. If you are looking to add the stock to your portfolio and your general thoughts around this stock.

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