[1] Market Valuation: At P/S of 3.3, EMR stock is more expensive per dollar of sales compared to 2.9 for MMM
Market Valuation3M CompanyEmerson Electric Companyvs Emerson Electric CompanyAs of 11/12/2021 Price To Sales Ratio (P/S)2.93.3CheaperPrice To OpInc Ratio (P/EBIT)13.620.7CheaperPrice To Earnings Ratio (PE)17.424.9Cheaper
[2] Growth & Profits: Considering the valuation, the market appears to be rewarding EMR's higher revenue growth with less regard to profitability - EMR has demonstrated better revenue growth: 6.0% last Q (qoq), 20.0% last Q (yoy), 3.8% LTM, and 3.2% annually in last 3 FY - In comparison, MMM has grown at -0.09%, 7.1%, 11.4%, and 0.6% respectively, during the same periods - However, MMM has shown greater profit generation promise: MMM, 20.9% average margin, -1.1% average margin expansion, and 22.5% cash flow - The corresponding values for EMR stand at 15.8%, 1.9%, and 22.1%Note: Average margin is based on average of last Q, LTM, and last 3 FY, while margin change is based on last Q margin vs 3Y average
Growth & Profit3M CompanyEmerson Electric Companyvs Emerson Electric Company As of 11/12/2021 Revenue GrowthLast Q Growth (QoQ)-0.09%6%Growing SlowerLast Q Growth (YoY)7.1%20%Growing SlowerLTM Growth11.4%3.8%Growing FasterLast 3 Fiscal Year CAGR0.6%3.2%Growing Slower ProfitabilityLast Q OpInc Margin20%16.6%More ProfitableLTM OpInc Margin21.6%15.9%More ProfitableLast 3 Fiscal Year Average21.1%14.8%More ProfitableLTM FCF Margin22.5%22.1%Higher Cash Flow %
[3] Financial Risk: Also, is the market ignoring risk to EMR? Unlikely as the company does not appear to be at higher risk vs MMM - EMR has a better debt position, with debt as % of equity of 12.6% vs 15.5% for MMM - EMR has more cash cushion, with cash as % of assets of 11.7% vs 10.1% for MMM
Financial Risk3M CompanyEmerson Electric Companyvs Emerson Electric Company As of 11/12/2021Debt as % of Equity15.5%12.6%Higher Debt LoadCash as % of Assets10.1%11.7%Similar Cash Position
[4] Market Returns: What about market returns of MMM vs EMR? - EMR has higher average annualized return of 12.2% vs -4.3% for MMM based on key market periods - These key market periods include, year-to-date, pre-covid to now, and 1, 2, and 3 years prior to covid
Precovid date is taken as end of Feb 2020
Notes:
[1] Q = quarter, LTM = last twelve months, FY = fiscal years, yoy = year-on-year, qoq = quarter-on-quarter
[2] Revenue growth decision is made by giving more weightage to long-term revenue growth (3-year average) and lesser weightage to quarterly growths
[3] Margin mentioned is average of last Q, LTM, and last 3 FY; margin increase is average of increase in last Q vs LTM and increase in last Q vs 3-FY average