What is MMM's Intrinsic value?

3M Co (MMM) Intrinsic Value Analysis

Executive Summary

As of May 27, 2025, 3M Co's estimated intrinsic value ranges from $132.39 to $162.99 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $162.99 +10.4%
Discounted Cash Flow (5Y) $148.26 +0.4%
Dividend Discount Model (Multi-Stage) $132.39 -10.3%
Dividend Discount Model (Stable) $150.81 +2.2%
Earnings Power Value $133.28 -9.7%

Is 3M Co (MMM) undervalued or overvalued?

With the current market price at $147.62, the stock appears to be fairly valued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate 3M Co's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.72 0.9
Cost of equity 7.2% 9.9%
Cost of debt 4.0% 4.8%
Tax rate 17.4% 18.6%
Debt/Equity ratio 0.16 0.16
After-tax WACC 6.6% 9.0%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.8% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $24,575 (FY12-2024) to $25,487 (FY12-2034)
  • Net profit margin expansion from 16% to 29%
  • Capital expenditures maintained at approximately 5% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $148 $86,939M 80.1%
10-Year Growth $163 $94,869M 64.2%
5-Year EBITDA $152 $88,845M 80.5%
10-Year EBITDA $165 $95,878M 64.6%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 35.4%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.5%
  • Long-term growth rate: 3.0%
  • Fair value: $132.39 (-10.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.9% (Low) to 7.2% (High)
  • Long-term growth rate: 2.0% (Low) to 4.0% (High)
  • Fair value range: $72 to $230
  • Selected fair value: $150.81 (2.2% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $6,033M
Discount Rate (WACC) 9.0% - 6.6%
Enterprise Value $66,723M - $91,030M
Net Debt $7,150M
Equity Value $59,573M - $83,880M
Outstanding Shares 538M
Fair Value $111 - $156
Selected Fair Value $133.28

Key Financial Metrics

Metric Value
Market Capitalization $79446M
Enterprise Value $86596M
Trailing P/E 18.22
Forward P/E 21.71
Trailing EV/EBITDA 14.70
Current Dividend Yield 194.22%
Dividend Growth Rate (5Y) -12.54%
Debt-to-Equity Ratio 0.16

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 30% $48.90
Discounted Cash Flow (5Y) 25% $37.06
Dividend Discount Model (Multi-Stage) 20% $26.48
Dividend Discount Model (Stable) 15% $22.62
Earnings Power Value 10% $13.33
Weighted Average 100% $148.39

Investment Conclusion

Based on our comprehensive valuation analysis, 3M Co's weighted average intrinsic value is $148.39, which is approximately 0.5% above the current market price of $147.62.

Key investment considerations:

  • Strong projected earnings growth (16% to 29% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.16)

Given these factors, we believe 3M Co is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.