Every 3M Investor Should Keep an Eye on These 3 Numbers

2 months ago 19

Ryan Vanzo, The Motley Fool

Thu, Apr 3, 2025, 5:15 AM 3 min read

3M (NYSE: MMM) banal has had a chaotic ride. After years of litigation surrounding its multi-decade accumulation of PFAS -- deemed "forever" chemicals that wreak havoc connected the wellness of some exposed humans and ecosystems -- shares yet recovered a bottommost past year. Over the past 12 months, 3M's stock terms has spiked by much than 50%.

After a ample settlement, overmuch of 3M's concern has stabilized, including galore gauges of profitability. But the institution isn't wholly successful the wide yet. In fact, determination could beryllium adjacent much PFAS lawsuits to come. That's a occupation fixed the numbers below.

Last quarter, 3M's return connected assets -- a metric that tracks however bully the institution is astatine making wealth from its assets -- jumped backmost toward humanities levels. The aforesaid occurred with 3M's instrumentality connected equity -- a metric that shows however bully it is astatine generating profits for each dollar of shareholder equity. If you disregard the past fewer years of abnormal fiscal results, ROA for 3M has averaged conscionable supra 10% successful caller years, with ROE hovering conscionable beneath 30%.

How tin returns connected equity beryllium 30% portion returns connected assets are conscionable 10%? This is the dynamic that existent investors indispensable understand.

MMM Return connected Equity information by YCharts

Companies tin boost returns connected equity by taking connected debt. Greater indebtedness levels, each things equal, volition make higher returns connected equity versus little indebtedness levels. That's large quality for shareholders unless those indebtedness levels go unsustainable, perchance forcing the institution into bankruptcy, typically wiping retired equity holders.

Since the PFAS ineligible troubles began, 3M's debt-to-equity levels person risen substantially. That's helped ROE rebound contempt little than mean ROA levels. But the adjacent fewer years could spot much fiscal instability for 3M stemming from further class-action lawsuits, and adjacent ineligible challenges brought by well-financed authorities governments similar California and New York.

3M is acold from going bankrupt, but its caller fiscal results were partially fueled by precocious indebtedness levels. That could go an contented if much litigation rolls in.

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