Analysis of Long-term (Investment) Activity Ratios
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
Long-term Activity Ratios (Summary)
3M Co., long-term (investment) activity ratios
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
The analysis of long-term activity ratios from 2017 to 2021 reveals a period of volatility in asset utilization, characterized by a peak in efficiency around 2018 followed by a general decline and a partial recovery by the end of the period.
- Net Fixed Asset Turnover
- The net fixed asset turnover ratio remained relatively stable, fluctuating between 3.42 and 3.75. A peak was observed in 2018 at 3.75, followed by a moderate decline in 2019 and 2020, before returning to 3.75 in 2021. This suggests a consistent ability to generate revenue from fixed assets, despite short-term fluctuations.
- Net Fixed Asset Turnover (Including Operating Lease, Right-of-Use Asset)
- A distinct divergence is observed when accounting for right-of-use assets. While the ratio matched the standard fixed asset turnover in 2017 and 2018, it experienced a significant drop to 3.15 in 2019 and 3.13 in 2020. This downward shift indicates an increase in the asset base due to lease recognition, which initially lowered the turnover efficiency before improving to 3.44 in 2021.
- Total Asset Turnover
- Total asset turnover exhibited a downward trend between 2018 and 2020, falling from a high of 0.90 to a low of 0.68. This indicates a decrease in the overall efficiency of the company's total asset base in generating sales. A recovery to 0.75 was noted in 2021, although this remains below the 2017 and 2018 levels.
- Equity Turnover
- Equity turnover showed a notable peak in 2018 at 3.34, followed by a consistent downward trajectory through 2021, ending at 2.35. This steady decline suggests that the company generated progressively less revenue for every unit of shareholder equity over the final four years of the period analyzed.
In summary, while fixed asset efficiency recovered by 2021, the broader total asset and equity turnover ratios indicate a long-term trend of diminishing efficiency in utilizing the total capital and equity base to drive revenue.
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Net Fixed Asset Turnover
3M Co., net fixed asset turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales | 35,355) | 32,184) | 32,136) | 32,765) | 31,657) | |
| Property, plant and equipment, net | 9,429) | 9,421) | 9,333) | 8,738) | 8,866) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover1 | 3.75 | 3.42 | 3.44 | 3.75 | 3.57 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover, Competitors2 | ||||||
| Boeing Co. | 5.70 | — | — | — | — | |
| Caterpillar Inc. | 3.99 | — | — | — | — | |
| Eaton Corp. plc | 6.41 | — | — | — | — | |
| GE Aerospace | 5.47 | — | — | — | — | |
| Honeywell International Inc. | 6.18 | — | — | — | — | |
| Lockheed Martin Corp. | 8.83 | — | — | — | — | |
| RTX Corp. | 4.30 | — | — | — | — | |
| Net Fixed Asset Turnover, Sector | ||||||
| Capital Goods | 5.46 | — | — | — | — | |
| Net Fixed Asset Turnover, Industry | ||||||
| Industrials | 2.72 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Net fixed asset turnover = Net sales ÷ Property, plant and equipment, net
= 35,355 ÷ 9,429 = 3.75
2 Click competitor name to see calculations.
The analysis of net fixed asset turnover from 2017 to 2021 reveals a period of fluctuation characterized by an initial increase, a mid-period decline, and a subsequent recovery to peak levels. This movement indicates a dynamic relationship between the scale of long-term capital investments and the resulting revenue generation.
- Revenue and Asset Base Dynamics
- Net sales exhibited an overall upward trajectory, growing from 31,657 million US$ in 2017 to 35,355 million US$ in 2021. Concurrently, net property, plant, and equipment increased from 8,866 million US$ in 2017 to 9,429 million US$ in 2021. The most significant expansion of the asset base occurred between 2018 and 2019, when net PPE rose from 8,738 million US$ to 9,333 million US$.
- Efficiency Fluctuations
- The net fixed asset turnover ratio peaked at 3.75 in 2018, driven by a combination of rising sales and a slight reduction in the net asset base. A downward trend followed in 2019 and 2020, with the ratio decreasing to 3.44 and 3.42, respectively. This decline indicates that the increase in capital investments during this window did not yield immediate proportional growth in sales, resulting in a temporary reduction in asset productivity.
- Recovery and Asset Optimization
- By December 31, 2021, the turnover ratio returned to 3.75. This recovery was primarily driven by a substantial increase in net sales to 35,355 million US$, while the net property, plant, and equipment base remained nearly flat at 9,429 million US$. This suggests a successful optimization of existing capacity to drive higher revenue throughput.
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Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset)
3M Co., net fixed asset turnover (including operating lease, right-of-use asset) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales | 35,355) | 32,184) | 32,136) | 32,765) | 31,657) | |
| Property, plant and equipment, net | 9,429) | 9,421) | 9,333) | 8,738) | 8,866) | |
| Operating lease right of use assets | 858) | 864) | 858) | —) | —) | |
| Property, plant and equipment, net (including operating lease, right-of-use asset) | 10,287) | 10,285) | 10,191) | 8,738) | 8,866) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover (including operating lease, right-of-use asset)1 | 3.44 | 3.13 | 3.15 | 3.75 | 3.57 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Competitors2 | ||||||
| Boeing Co. | 5.04 | — | — | — | — | |
| Caterpillar Inc. | 3.79 | — | — | — | — | |
| Eaton Corp. plc | 5.60 | — | — | — | — | |
| GE Aerospace | 4.55 | — | — | — | — | |
| Honeywell International Inc. | 5.28 | — | — | — | — | |
| Lockheed Martin Corp. | 7.54 | — | — | — | — | |
| RTX Corp. | 3.80 | — | — | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Sector | ||||||
| Capital Goods | 4.80 | — | — | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Industry | ||||||
| Industrials | 2.34 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Net fixed asset turnover (including operating lease, right-of-use asset) = Net sales ÷ Property, plant and equipment, net (including operating lease, right-of-use asset)
= 35,355 ÷ 10,287 = 3.44
2 Click competitor name to see calculations.
The analysis of net fixed asset turnover reveals a period of volatility in asset utilization efficiency between 2017 and 2021, characterized by an initial peak, a mid-period decline, and a subsequent recovery.
- Revenue and Asset Base Trends
- Net sales exhibited a general upward trajectory over the five-year period, growing from 31,657 million in 2017 to 35,355 million by 2021. During the same timeframe, the net fixed asset base, inclusive of right-of-use assets, experienced a notable expansion in 2019, increasing from 8,738 million in 2018 to 10,191 million, before stabilizing at approximately 10,287 million through 2021.
- Net Fixed Asset Turnover Performance
- The turnover ratio peaked in 2018 at 3.75, reflecting a period of high efficiency where sales growth coincided with a slight reduction in the asset base. A significant contraction occurred in 2019, with the ratio falling to 3.15. This decline is directly attributable to the substantial increase in net fixed assets, which outpaced revenue growth during that fiscal year.
- Recovery and Asset Utilization
- After reaching a low of 3.13 in 2020, the turnover ratio recovered to 3.44 in 2021. This improvement was driven by a sharp increase in net sales while the fixed asset base remained nearly constant, indicating an enhanced capacity to generate revenue from the established investment in property, plant, and equipment.
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Total Asset Turnover
3M Co., total asset turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales | 35,355) | 32,184) | 32,136) | 32,765) | 31,657) | |
| Total assets | 47,072) | 47,344) | 44,659) | 36,500) | 37,987) | |
| Long-term Activity Ratio | ||||||
| Total asset turnover1 | 0.75 | 0.68 | 0.72 | 0.90 | 0.83 | |
| Benchmarks | ||||||
| Total Asset Turnover, Competitors2 | ||||||
| Boeing Co. | 0.45 | — | — | — | — | |
| Caterpillar Inc. | 0.58 | — | — | — | — | |
| Eaton Corp. plc | 0.58 | — | — | — | — | |
| GE Aerospace | 0.36 | — | — | — | — | |
| Honeywell International Inc. | 0.53 | — | — | — | — | |
| Lockheed Martin Corp. | 1.32 | — | — | — | — | |
| RTX Corp. | 0.40 | — | — | — | — | |
| Total Asset Turnover, Sector | ||||||
| Capital Goods | 0.50 | — | — | — | — | |
| Total Asset Turnover, Industry | ||||||
| Industrials | 0.58 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Total asset turnover = Net sales ÷ Total assets
= 35,355 ÷ 47,072 = 0.75
2 Click competitor name to see calculations.
The analysis of investment activity reveals a period of fluctuation in asset utilization efficiency between 2017 and 2021. While net sales showed an overall upward trajectory, the efficiency with which assets were used to generate those sales experienced a significant decline before showing signs of recovery in the final year of the period.
- Net Sales Performance
- Net sales exhibited moderate growth and stability for the majority of the period, remaining within the range of 31.6 billion to 32.8 billion USD from 2017 through 2020. A notable increase occurred in 2021, where sales reached 35.3 billion USD, representing the highest volume in the analyzed five-year span.
- Total Asset Base Evolution
- The asset base remained relatively stable between 2017 and 2018, with a slight decrease to 36.5 billion USD. However, a substantial expansion in total assets occurred starting in 2019, rising sharply to 44.6 billion USD and peaking at 47.3 billion USD in 2020. This indicates a significant increase in the company's investment in assets during this interval.
- Total Asset Turnover Trends
- The total asset turnover ratio peaked in 2018 at 0.90, driven by the combination of rising sales and a contracting asset base. This efficiency declined sharply in 2019 and 2020, reaching a low of 0.68. This downward trend correlates directly with the rapid expansion of total assets, which outpaced the growth of net sales during those years. A partial recovery is observed in 2021, as the ratio improved to 0.75, supported by the surge in net sales while the asset base remained nearly constant.
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Equity Turnover
3M Co., equity turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales | 35,355) | 32,184) | 32,136) | 32,765) | 31,657) | |
| Total 3M Company shareholders’ equity | 15,046) | 12,867) | 10,063) | 9,796) | 11,563) | |
| Long-term Activity Ratio | ||||||
| Equity turnover1 | 2.35 | 2.50 | 3.19 | 3.34 | 2.74 | |
| Benchmarks | ||||||
| Equity Turnover, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 2.92 | — | — | — | — | |
| Eaton Corp. plc | 1.20 | — | — | — | — | |
| GE Aerospace | 1.76 | — | — | — | — | |
| Honeywell International Inc. | 1.85 | — | — | — | — | |
| Lockheed Martin Corp. | 6.12 | — | — | — | — | |
| RTX Corp. | 0.88 | — | — | — | — | |
| Equity Turnover, Sector | ||||||
| Capital Goods | 2.28 | — | — | — | — | |
| Equity Turnover, Industry | ||||||
| Industrials | 2.63 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Equity turnover = Net sales ÷ Total 3M Company shareholders’ equity
= 35,355 ÷ 15,046 = 2.35
2 Click competitor name to see calculations.
The equity turnover ratio demonstrates a cyclical pattern characterized by an initial peak followed by a sustained decline. Although net sales grew overall from 2017 to 2021, the efficiency of the equity base in generating these sales diminished over time due to a significant expansion of shareholders' equity.
- Net Sales Dynamics
- Net sales remained relatively stagnant between 2017 and 2020, oscillating near 32 billion USD. A significant increase was observed in 2021, with sales rising to 35,355 million USD, indicating a recovery or expansion in market reach toward the end of the period.
- Equity Base Evolution
- Shareholders' equity decreased in 2018 to 9,796 million USD but subsequently entered a period of steady growth. By the end of 2021, equity had increased to 15,046 million USD, reflecting a substantial accumulation of capital or retained earnings.
- Equity Turnover Correlation
- The equity turnover ratio peaked at 3.34 in 2018, driven by the simultaneous increase in sales and decrease in equity. From 2019 through 2021, the ratio declined sequentially to 3.19, 2.50, and 2.35. This downward trend indicates that the growth in the equity base outpaced the growth in revenue, resulting in a lower capacity to generate sales relative to the amount of equity invested.
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