In this articale I am going to analyze 3M Co. stock based in its earning for the last 6 years and its (P/E) ratio, to see how much its stock will worth in 2027.
First, I need to go back to the company financial statement and see how was its EPS doing. As shown below in the graph:
3M co. EPS increased from 8.95$ per share from year 2017 until it reached 11.48$ in 2022, with slight drop from year 2018 to 2020 where it was ranging from 7.49$ to 8.52. However, the company managed to go back to track in year 2021 with 10.22 $ and increase that in 2022 to make it 11.48$. Therefor, its fair to say that 3M Co. has 5.11% growth rate of its EPS.
Now that we have the growth rate of the 3M Co. EPS in the last five years, we are going to use this growth rate to estimate what will its EPS be in 2027 ,which is five years from now by applying the following formula:
FV=PV(1+i)n
- Where
- PV = 3M EPS in year 2022 = 11.48 $
- i = growth rate of 3M EPS estimated above = 5.11%
- n = years of investment = 5 years in 2027
By substitute the numbers estimated early in the above formula, I end up with 3M CO. EPS in year 2027 equal to 14.73$.
Now, I have to see what was (P/E) ratio that 3M Co. did have in the last six years, which as shown below:
Now we can estimated two scenarios for 3M Co. stock price which is known as Bull market and the bear market.
For Bull market , I am going to take the highest (P/E) ratio which was 20.51 in year 2018, to see what will be the price of 3M stock in 2027:
Bull market 3M Co. Stock price in 2027= (20.51)*(14.73) = 363.6$
For Bear market, I will take the lowest (p/E) ratio which was 9.51 in year 2022, to see what will be the price of 3M stock in 2027;
Bear market 3M Co. Stock price in 2027= (9.51)*(14.73) = 140.1$
As of writing this article, 3M Co. stock price is 120.14$ which is below the bear market scenario by 16.6% which is really good margin of safety. Additionally if we just take the average of both (Bull market price and bear market price) scenarios which is 251.85$, and assume that the price of 3M Co. stock in 2027, that means when investing 10,000$ in 3M stock, it will worth 20,963$ in 2027.
Leave a Reply