Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
NEW YORK (
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) has been reiterated by TheStreet Ratings as a buy with a ratings score of A+ . The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins, growth in earnings per share and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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Highlights from the ratings report include:
- The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, MMM has a quick ratio of 1.62, which demonstrates the ability of the company to cover short-term liquidity needs.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Industrial Conglomerates industry and the overall market, 3M CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for 3M CO is rather high; currently it is at 52.90%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 15.50% is above that of the industry average.
- 3M CO's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, 3M CO increased its bottom line by earning $5.96 versus $5.64 in the prior year. This year, the market expects an improvement in earnings ($6.41 versus $5.96).
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
3M Company operates as a diversified technology company worldwide. The company has a P/E ratio of 15.3, above the average conglomerates industry P/E ratio of 15 and below the S&P 500 P/E ratio of 17.7. 3M has a market cap of $63.32 billion and is part of the
industry. Shares are up 15.3% year to date as of the close of trading on Tuesday.
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--Written by a member of TheStreet Ratings Staff.