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3M Loses Its Position in S&P
Posted by: Muhammad Bazil (IP Logged)
Date: December 5, 2012 09:24AM
3M Co. (MMM) recently lost its No. 40 spot in the S&P 500 to eBay (EBAY) when compared in accordance with the market capitalization of the companies. The market capital of eBay is $62.01 billion as against 3M’s $61.98 billion.
3M is a highly diversified technology company with six major business segments: industrial and transportation; healthcare; consumer and office; safety, security and protection services; display and graphics; and electro and communications. The diverse portfolio of the products and services of 3M has helped it reach out to diverse markets, and this factor has helped in the growth of the company. However, the news that 3M lost its position to eBay may be interpreted as negative for the company. On the other hand, there are a number of factors that influence the market capitalization of a company; therefore, all these factors should be taken into account before forming a judgment regarding its financial performance.
One of the factors may be the number of shares floated by the company in the market. If a company seeks to expand its capital, it may increase the number of its shares floated in the market. This way, the company acquires additional market capital. One of the direct competitors of 3M is General Electric (GE). General Electric competes with 3M in various business segments, including healthcare, transportation and business solutions.
Market capitalization is a highly important factor to consider for individual investors and mutual funds because it helps in classifying the companies in different strata in accordance with their market capital. For investors who seek to invest in companies with a potential to grow in prospective periods may be interested in investing in companies with smaller market capitals but promising financial performances. However, investors who seek to make short term or long term gains may invest in the stocks companies with larger market caps.
3M Co.’s Financial Results for Quarter Ended Sept. 30, 2012
The company reported revenue of $7.5 billion which was lower than last quarter’s $7.534 billion. The revenue for the latest quarter was also lower compared to the same quarter in the last financial period in which it was $7.531 billion. The net income reported by the company was $1.161 billion; this was also lower than last quarter’s net income which was $1.167 billion. However, the net income for the quarter was higher than the same quarter in the last financial period when it was $1.088 billion. When the financial ratios are taken into consideration, it can be said that the company has maintained its net margin at 15.5%; this is the same as last quarter and higher than the same quarter in the last financial period in which it was 14.4%. The profit margin of 3M is 14.89% and its operating margin is 21.63%.
Although the company has not performed well in comparison with its prior periods, the financial results are fairly positive when compared to the industry averages.
3M’s Market Performance
Stocks of 3M have exhibited a volatile behavior in the recent past. The current prevailing share price range of the company is $89.15 to $89.99 which is fairly stable; however, when the 52-week data is taken into consideration, it can be observed that the share price of the company has witnessed some highs and lows. In the last 52 weeks, the share price was at its lowest at $75.49 in the month of November in 2011, and it was at its highest at $95.46 in October 2012. If the short-term fluctuations are ignored, it can be concluded that the share price of the company has moved upwards and it has risen significantly in the past year. The earnings per share of 3M have improved by 8.6% in the most recent quarter as compared to the same quarter in the comparative period.
After the analysis of 3M’s market capital, latest financial results and market performance, investors should buy the stock of the company. The rationale behind this recommendation is that 3M has maintained its profitability ratios and this factor suggests that the company holds potential for growth in the prospective periods. Another factor is the growth in the markets in which the company operates. Two of 3M’s segments, display and graphics and electro and communications, have significant potential for future growth.
Stocks Discussed: MMM, GE, EBAY,