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Let's talk about the popular 3M Company (NYSE:MMM). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine 3M’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for 3M
Is 3M Still Cheap?
Great news for investors – 3M is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $179.99, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Although, there may be another chance to buy again in the future. This is because 3M’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from 3M?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -0.8% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for 3M. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although MMM is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to MMM, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on MMM for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - 3M has 2 warning signs we think you should be aware of.