Is 3M Co (MMM) Rally Worth Chasing?

Valuations and Metrics

3M trades at 16.11x earnings, which is at a bit of a premium to the 14.44x industry average. The forward P/E is a bit better at 13.56x. The price to sales ratio is also a bit higher than the industry average, at 2.34 versus 1.4. However, the operating margin is excellent with 21.7%, and return on equity is also good with 26.6%. Johnson & Johnson (NYSE:JNJ), who compete with 3M in the healthcare segment, trade at 19.3x earnings, and about 3.1x sales. With a massive market cap of over $200 billion dollars, J&J maintains a higher operating margin than 3M with a slightly lower total debt to equity ratio.

Bottom Line

Although 3M has had a great run recently, there still may be some upside left for this technology manufacturer. With solid earnings that are on the increase, as well as a fair valuation, the stock is a solid blue-chip choice with fairly low volatility, as well as a dividend. Cautious investors may be best off waiting for a pullback, as the stock is looking a little over-extended at the moment and is trading at a slight premium to the industry.

The article Is 3M Rally Worth Chasing? originally appeared on Fool.com and is written by Daniel James.

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