3M (MMM) is consistently billed as one of the world's most innovative companies, despite being over 100 years old.

The industrial giant, founded to mine a mineral deposit in 1902, now offers more than 55,000 products to a wide variety of markets and has a presence in some 200 countries. The company's major products include adhesives, laminates, fire protection products, medical and surgical supplies, dental products, office supplies, optical film and car care products.

Some of the company's most recognizable brands include Scotch Tape, Post-It products, ACE bandages and Thinsulate insulation products. It competes with conglomerates such as DuPont (DD) and Johnson & Johnson (JNJ).

We recently launched coverage of 3M with a price estimate of $97, about 20% ahead of the current market price.

See our full analysis for 3M here

3M's business segments

3M's products are organized into six segments:

• Industrial adhesives and specialty chemicals
  

• Medical supplies and dental products
  

• Display and graphics
  

• Safety, security and protection services
  

• Post-Its, consumer products and office supplies

• Electrical materials, circuits and fiber-optic cables.
  

According to our analysis, 3M's most important segment is industrial adhesives and specialty chemicals, which we estimate contributes nearly 30% to the company's value. We estimate that the company derives about 22% of its value from the medical supplies and dental products segment.

While the company is already a market-leader in many established and mature markets, we believe that it is well-positioned for strong near-term growth in most of its key segments. 3M is one of the biggest research and development spenders in the world, which should allow the company to continue creating innovative products.

Additionally, with nearly two-thirds of sales coming from international markets, the company should be able to benefit from substantial growth in developing countries. We expect that the company will enjoy mid-to-high single-digit organic revenue growth over the next few years, which will gradually slow as the company's international markets mature.

Key trends affecting 3M

Innovation, emerging markets to drive growth

3M has consistently made acquisitions to bolster market share and diversify into new product lines. While we have not factored any acquisitions into our model, we expect the company to remain acquisitive in order to foster growth and innovation. Additionally, the company's heavy R&D focus has resulted in innovative and unique products. We expect that the company's focus on high-growth areas like renewable energy and bioplastics will allow the company to maintain its market share in the face of increasing international competition.

Emerging economies such as India and China will drive significant growth in many of 3M's markets in the near term. As the middle class grows in these countries and disposable incomes increase, we expect substantial growth in demand for consumer goods and household products while rapid industrialization will drive growth in demand for office supplies and specialty chemicals. Lastly, with more readily available healthcare, we expect the medical device markets in these countries to grow rapidly.

R&D focus to offset margin pressure

3M's medical supplies and dental products margins are typically in the 30% range, while those for other divisions are mostly around 20%, which is what allows this segment to contribute such a meaningful percentage of 3M's value. The division's margins are so high because the uniqueness of 3M's products and patent protection allows the company to charge premium prices. Accordingly, the company must continue to be innovative in producing new (patent-protected) products and in protecting its existing patent portfolio.

We expect margins to be pressured in the near term as the company moves into lower cost healthcare products in emerging markets, but we believe its innovative offerings and dedication to research and development will allow it to maintain healthy margins throughout our forecast period.