Intrinsic value of 3M - MMM

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$196.11

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$196.11

 
Intrinsic value

$131.01

 
Up/down potential

-33%

 
Rating

sell

 
Value-price divergence* premium content

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MMM stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 117.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -0.55
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  30,109
  30,711
  31,418
  32,225
  33,131
  34,136
  35,238
  36,438
  37,737
  39,137
  40,639
  42,245
  43,960
  45,786
  47,726
  49,784
  51,966
  54,276
  56,718
  59,298
  62,023
  64,898
  67,930
  71,125
  74,493
  78,039
  81,773
  85,703
  89,839
  94,190
  98,766
Variable operating expenses, $m
 
  23,660
  24,183
  24,781
  25,452
  26,196
  27,012
  27,901
  28,863
  29,900
  31,012
  31,285
  32,555
  33,907
  35,344
  36,868
  38,484
  40,194
  42,003
  43,914
  45,932
  48,061
  50,306
  52,672
  55,166
  57,792
  60,558
  63,468
  66,531
  69,753
  73,142
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  22,886
  23,660
  24,183
  24,781
  25,452
  26,196
  27,012
  27,901
  28,863
  29,900
  31,012
  31,285
  32,555
  33,907
  35,344
  36,868
  38,484
  40,194
  42,003
  43,914
  45,932
  48,061
  50,306
  52,672
  55,166
  57,792
  60,558
  63,468
  66,531
  69,753
  73,142
Operating income, $m
  7,223
  7,051
  7,234
  7,444
  7,679
  7,940
  8,226
  8,537
  8,874
  9,237
  9,627
  10,960
  11,405
  11,879
  12,382
  12,916
  13,482
  14,081
  14,715
  15,385
  16,091
  16,837
  17,624
  18,453
  19,327
  20,247
  21,215
  22,235
  23,308
  24,437
  25,624
EBITDA, $m
  8,697
  8,786
  8,988
  9,219
  9,478
  9,766
  10,081
  10,424
  10,796
  11,196
  11,626
  12,086
  12,576
  13,099
  13,654
  14,243
  14,867
  15,527
  16,226
  16,964
  17,744
  18,566
  19,434
  20,348
  21,311
  22,326
  23,394
  24,518
  25,702
  26,946
  28,255
Interest expense (income), $m
  194
  375
  391
  409
  429
  452
  477
  505
  535
  568
  603
  641
  681
  724
  770
  819
  871
  926
  984
  1,045
  1,110
  1,179
  1,251
  1,327
  1,408
  1,492
  1,582
  1,676
  1,774
  1,878
  1,988
Earnings before tax, $m
  7,053
  6,676
  6,844
  7,035
  7,250
  7,488
  7,749
  8,032
  8,339
  8,670
  9,024
  10,320
  10,724
  11,155
  11,612
  12,097
  12,612
  13,156
  13,731
  14,339
  14,981
  15,659
  16,373
  17,126
  17,919
  18,754
  19,634
  20,560
  21,534
  22,558
  23,636
Tax expense, $m
  1,995
  1,802
  1,848
  1,900
  1,958
  2,022
  2,092
  2,169
  2,252
  2,341
  2,436
  2,786
  2,896
  3,012
  3,135
  3,266
  3,405
  3,552
  3,707
  3,872
  4,045
  4,228
  4,421
  4,624
  4,838
  5,064
  5,301
  5,551
  5,814
  6,091
  6,382
Net income, $m
  5,050
  4,873
  4,996
  5,136
  5,293
  5,466
  5,657
  5,864
  6,088
  6,329
  6,588
  7,533
  7,829
  8,143
  8,477
  8,831
  9,206
  9,604
  10,024
  10,468
  10,936
  11,431
  11,952
  12,502
  13,081
  13,691
  14,333
  15,008
  15,720
  16,468
  17,254

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,678
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  32,906
  30,835
  31,544
  32,354
  33,265
  34,273
  35,380
  36,584
  37,889
  39,294
  40,802
  42,415
  44,137
  45,969
  47,917
  49,984
  52,175
  54,494
  56,946
  59,536
  62,272
  65,158
  68,203
  71,411
  74,792
  78,352
  82,101
  86,047
  90,199
  94,568
  99,163
Adjusted assets (=assets-cash), $m
  30,228
  30,835
  31,544
  32,354
  33,265
  34,273
  35,380
  36,584
  37,889
  39,294
  40,802
  42,415
  44,137
  45,969
  47,917
  49,984
  52,175
  54,494
  56,946
  59,536
  62,272
  65,158
  68,203
  71,411
  74,792
  78,352
  82,101
  86,047
  90,199
  94,568
  99,163
Revenue / Adjusted assets
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
  0.996
Average production assets, $m
  10,976
  11,210
  11,467
  11,762
  12,093
  12,460
  12,862
  13,300
  13,774
  14,285
  14,833
  15,420
  16,045
  16,712
  17,420
  18,171
  18,968
  19,811
  20,702
  21,644
  22,638
  23,688
  24,794
  25,961
  27,190
  28,484
  29,847
  31,282
  32,791
  34,379
  36,050
Working capital, $m
  5,507
  3,870
  3,959
  4,060
  4,175
  4,301
  4,440
  4,591
  4,755
  4,931
  5,120
  5,323
  5,539
  5,769
  6,013
  6,273
  6,548
  6,839
  7,146
  7,472
  7,815
  8,177
  8,559
  8,962
  9,386
  9,833
  10,303
  10,799
  11,320
  11,868
  12,445
Total debt, $m
  11,695
  11,165
  11,672
  12,253
  12,904
  13,626
  14,419
  15,281
  16,215
  17,221
  18,301
  19,456
  20,689
  22,001
  23,396
  24,876
  26,444
  28,104
  29,860
  31,715
  33,674
  35,740
  37,920
  40,217
  42,638
  45,187
  47,872
  50,697
  53,670
  56,798
  60,087
Total liabilities, $m
  22,608
  22,078
  22,585
  23,166
  23,817
  24,539
  25,332
  26,194
  27,128
  28,134
  29,214
  30,369
  31,602
  32,914
  34,309
  35,789
  37,357
  39,017
  40,773
  42,628
  44,587
  46,653
  48,833
  51,130
  53,551
  56,100
  58,785
  61,610
  64,583
  67,711
  71,000
Total equity, $m
  10,298
  8,757
  8,958
  9,189
  9,447
  9,734
  10,048
  10,390
  10,760
  11,159
  11,588
  12,046
  12,535
  13,055
  13,609
  14,196
  14,818
  15,476
  16,173
  16,908
  17,685
  18,505
  19,370
  20,281
  21,241
  22,252
  23,317
  24,437
  25,617
  26,857
  28,162
Total liabilities and equity, $m
  32,906
  30,835
  31,543
  32,355
  33,264
  34,273
  35,380
  36,584
  37,888
  39,293
  40,802
  42,415
  44,137
  45,969
  47,918
  49,985
  52,175
  54,493
  56,946
  59,536
  62,272
  65,158
  68,203
  71,411
  74,792
  78,352
  82,102
  86,047
  90,200
  94,568
  99,162
Debt-to-equity ratio
  1.136
  1.270
  1.300
  1.330
  1.370
  1.400
  1.440
  1.470
  1.510
  1.540
  1.580
  1.620
  1.650
  1.690
  1.720
  1.750
  1.780
  1.820
  1.850
  1.880
  1.900
  1.930
  1.960
  1.980
  2.010
  2.030
  2.050
  2.070
  2.100
  2.110
  2.130
Adjusted equity ratio
  0.258
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5,050
  4,873
  4,996
  5,136
  5,293
  5,466
  5,657
  5,864
  6,088
  6,329
  6,588
  7,533
  7,829
  8,143
  8,477
  8,831
  9,206
  9,604
  10,024
  10,468
  10,936
  11,431
  11,952
  12,502
  13,081
  13,691
  14,333
  15,008
  15,720
  16,468
  17,254
Depreciation, amort., depletion, $m
  1,474
  1,735
  1,754
  1,775
  1,799
  1,826
  1,855
  1,887
  1,922
  1,959
  1,999
  1,126
  1,171
  1,220
  1,272
  1,326
  1,384
  1,446
  1,511
  1,580
  1,652
  1,729
  1,810
  1,895
  1,985
  2,079
  2,179
  2,283
  2,394
  2,509
  2,631
Funds from operations, $m
  6,619
  6,608
  6,750
  6,911
  7,092
  7,292
  7,512
  7,751
  8,010
  8,288
  8,587
  8,659
  9,000
  9,363
  9,748
  10,157
  10,591
  11,050
  11,535
  12,048
  12,589
  13,160
  13,762
  14,397
  15,066
  15,770
  16,511
  17,292
  18,113
  18,977
  19,886
Change in working capital, $m
  -43
  76
  89
  102
  114
  127
  139
  151
  164
  176
  189
  202
  216
  230
  244
  259
  275
  291
  308
  325
  343
  362
  382
  403
  424
  447
  470
  495
  521
  548
  577
Cash from operations, $m
  6,662
  6,392
  6,661
  6,809
  6,978
  7,166
  7,373
  7,600
  7,846
  8,112
  8,398
  8,456
  8,784
  9,133
  9,504
  9,898
  10,316
  10,759
  11,227
  11,722
  12,246
  12,798
  13,380
  13,994
  14,641
  15,323
  16,041
  16,797
  17,592
  18,429
  19,309
Maintenance CAPEX, $m
  0
  -801
  -818
  -837
  -859
  -883
  -909
  -939
  -971
  -1,005
  -1,043
  -1,083
  -1,126
  -1,171
  -1,220
  -1,272
  -1,326
  -1,384
  -1,446
  -1,511
  -1,580
  -1,652
  -1,729
  -1,810
  -1,895
  -1,985
  -2,079
  -2,179
  -2,283
  -2,394
  -2,509
New CAPEX, $m
  -1,420
  -234
  -258
  -295
  -331
  -367
  -402
  -438
  -474
  -511
  -548
  -586
  -626
  -666
  -708
  -751
  -796
  -843
  -891
  -942
  -994
  -1,049
  -1,107
  -1,166
  -1,229
  -1,294
  -1,363
  -1,435
  -1,510
  -1,588
  -1,670
Cash from investing activities, $m
  -1,403
  -1,035
  -1,076
  -1,132
  -1,190
  -1,250
  -1,311
  -1,377
  -1,445
  -1,516
  -1,591
  -1,669
  -1,752
  -1,837
  -1,928
  -2,023
  -2,122
  -2,227
  -2,337
  -2,453
  -2,574
  -2,701
  -2,836
  -2,976
  -3,124
  -3,279
  -3,442
  -3,614
  -3,793
  -3,982
  -4,179
Free cash flow, $m
  5,259
  5,358
  5,584
  5,678
  5,788
  5,916
  6,061
  6,223
  6,401
  6,596
  6,807
  6,787
  7,032
  7,295
  7,576
  7,875
  8,193
  8,531
  8,890
  9,269
  9,671
  10,096
  10,544
  11,018
  11,517
  12,044
  12,599
  13,183
  13,799
  14,447
  15,129
Issuance/(repayment) of debt, $m
  1,043
  442
  508
  580
  652
  722
  792
  863
  934
  1,006
  1,080
  1,155
  1,233
  1,312
  1,395
  1,480
  1,568
  1,660
  1,756
  1,855
  1,959
  2,067
  2,180
  2,297
  2,421
  2,549
  2,684
  2,825
  2,973
  3,128
  3,290
Issuance/(repurchase) of shares, $m
  -2,949
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,948
  442
  508
  580
  652
  722
  792
  863
  934
  1,006
  1,080
  1,155
  1,233
  1,312
  1,395
  1,480
  1,568
  1,660
  1,756
  1,855
  1,959
  2,067
  2,180
  2,297
  2,421
  2,549
  2,684
  2,825
  2,973
  3,128
  3,290
Total cash flow (excl. dividends), $m
  3,278
  5,799
  6,092
  6,258
  6,440
  6,639
  6,854
  7,086
  7,335
  7,602
  7,886
  7,942
  8,265
  8,608
  8,971
  9,355
  9,762
  10,192
  10,645
  11,125
  11,630
  12,163
  12,724
  13,315
  13,938
  14,593
  15,283
  16,009
  16,772
  17,575
  18,419
Retained Cash Flow (-), $m
  1,131
  -165
  -201
  -230
  -258
  -286
  -314
  -342
  -370
  -399
  -428
  -458
  -489
  -521
  -553
  -587
  -622
  -659
  -696
  -736
  -777
  -820
  -865
  -911
  -960
  -1,011
  -1,065
  -1,121
  -1,179
  -1,241
  -1,305
Prev. year cash balance distribution, $m
 
  1,706
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  7,340
  5,891
  6,028
  6,182
  6,352
  6,539
  6,743
  6,964
  7,203
  7,458
  7,484
  7,776
  8,087
  8,417
  8,768
  9,140
  9,533
  9,949
  10,389
  10,853
  11,343
  11,859
  12,404
  12,978
  13,582
  14,218
  14,888
  15,593
  16,334
  17,114
Discount rate, %
 
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
PV of cash for distribution, $m
 
  7,031
  5,382
  5,229
  5,067
  4,895
  4,712
  4,516
  4,307
  4,086
  3,854
  3,495
  3,256
  3,009
  2,758
  2,505
  2,253
  2,005
  1,765
  1,535
  1,318
  1,116
  932
  766
  619
  492
  384
  294
  220
  162
  116
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

3M Company operates as a diversified technology company worldwide. The company’s Industrial segment offers tapes; coated, non-woven, and bonded abrasives; adhesives; advanced ceramics; sealants; specialty materials; separation and purification products; closure systems for personal hygiene products; acoustic systems products; automotive components; and abrasion-resistant films, and paint finishing and detailing products. Its Safety and Graphics Business segment provides personal protection products, traffic safety and security products, commercial graphics systems, commercial cleaning and protection products, floor matting, roofing granules for asphalt shingles, and fall protection products. The company’s Health Care segment offers medical and surgical supplies, skin health and infection prevention products, inhalation and transdermal drug delivery systems, dental and orthodontic products, health information systems, and food safety products. Its Electronics and Energy segment provides optical films; packaging and interconnection devices; insulating and splicing solutions; touch screens and touch monitors; renewable energy component solutions; and infrastructure protection products. The company’s Consumer segment offers sponges, scouring pads, high-performance cloths, repositionable notes, indexing systems, home improvement and care products, protective materials, and consumer and office tapes and adhesives. The company serves automotive, electronics and energy, appliance, paper and printing, packaging, food and beverage, construction, medical clinics and hospitals, pharmaceuticals, dental and orthodontic practitioners, health information systems, food manufacturing and testing, consumer and office retail, office business to business, home improvement, drug and pharmacy retail, and other markets directly, as well as through wholesalers, retailers, jobbers, distributors, and dealers. The company was founded in 1902 and is headquartered in St. Paul, Minnesota.

FINANCIAL RATIOS  of  3M (MMM)

Valuation Ratios
P/E Ratio 23.2
Price to Sales 3.9
Price to Book 11.4
Price to Tangible Book
Price to Cash Flow 17.6
Price to Free Cash Flow 22.3
Growth Rates
Sales Growth Rate -0.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -2.8%
Cap. Spend. - 3 Yr. Gr. Rate -3.1%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 104.1%
Total Debt to Equity 113.6%
Interest Coverage 37
Management Effectiveness
Return On Assets 15.8%
Ret/ On Assets - 3 Yr. Avg. 15.6%
Return On Total Capital 22.8%
Ret/ On T. Cap. - 3 Yr. Avg. 22.8%
Return On Equity 46.5%
Return On Equity - 3 Yr. Avg. 39.4%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 50.1%
Gross Margin - 3 Yr. Avg. 49.3%
EBITDA Margin 29%
EBITDA Margin - 3 Yr. Avg. 27.9%
Operating Margin 24%
Oper. Margin - 3 Yr. Avg. 23.1%
Pre-Tax Margin 23.4%
Pre-Tax Margin - 3 Yr. Avg. 22.7%
Net Profit Margin 16.8%
Net Profit Margin - 3 Yr. Avg. 16.1%
Effective Tax Rate 28.3%
Eff/ Tax Rate - 3 Yr. Avg. 28.7%
Payout Ratio 53%

MMM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MMM stock intrinsic value calculation we used $30109 million for the last fiscal year's total revenue generated by 3M. The default revenue input number comes from 2016 income statement of 3M. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MMM stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.4%, whose default value for MMM is calculated based on our internal credit rating of 3M, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of 3M.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MMM stock the variable cost ratio is equal to 77.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MMM stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for 3M.

Corporate tax rate of 27% is the nominal tax rate for 3M. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MMM stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MMM are equal to 36.5%.

Life of production assets of 13.7 years is the average useful life of capital assets used in 3M operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MMM is equal to 12.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $10298 million for 3M - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 597.763 million for 3M is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of 3M at the current share price and the inputted number of shares is $117.2 billion.


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COMPANY NEWS

▶ 3M Company Beats on Q1 Earnings: ETFs in Focus   [Apr-26-17 02:43PM  Zacks]
▶ Big-cap Dow earnings Blitz   [Apr-25-17 01:25PM  CNBC Videos]
▶ 3M beats Street 1Q forecasts   [07:40AM  Associated Press]
▶ 3M Announces Upcoming Investor Events   [Apr-19-17 04:00PM  Business Wire]
▶ How ankle-monitoring tech tripped up 3M   [Apr-07-17 03:54PM  American City Business Journals]
▶ Three Dow Stocks to Buy for The Second Quarter   [Apr-04-17 11:21AM  Investopedia]
▶ 5 stocks that can outperform the Street's Q2 jitters   [Apr-03-17 07:25PM  CNBC Videos]
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▶ 3 Top Dividend Aristocrats to Buy in April   [Apr-01-17 08:11AM  Motley Fool]
▶ Wisconsin, 3M reach fine-free pollution settlement   [Mar-29-17 07:46PM  Associated Press]
▶ Top Research Reports for Alphabet, 3M and P&G   [06:25PM  at Investopedia]
▶ San Antonio tech company settles patent infringement lawsuit   [Mar-28-17 08:12PM  at bizjournals.com]
▶ Investing Rookie? Start With These 3 Stocks   [Mar-21-17 12:43PM  at Motley Fool]
▶ 3M Buying Johnson Controls Unit for $2 Billion   [03:51PM  at Investopedia]
▶ 3M acquires unit of Johnson Controls for $2 billion   [12:30PM  at bizjournals.com]
▶ How Reliable Is 3M Co. Stock for Income Investors?   [Mar-14-17 05:30PM  at Motley Fool]
▶ 10 Most Ethical Companies In The US   [10:14AM  at Insider Monkey]
▶ 3M Announces Upcoming Investor Events   [Mar-01-17 01:00PM  Business Wire]
▶ 5 Key Takeaways From 3M Co.'s Earnings   [10:41AM  at Motley Fool]
▶ 3 Stocks to Help Fund Your Retirement   [10:27AM  at Motley Fool]
Stock chart of MMM Financial statements of MMM
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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