Which Is A Better Pick – Honeywell Or 3M Stock?

We believe 3M stock (NYSE: MMM) is a better pick than its sector peer, Honeywell stock (NYSE: HON), given its better prospects. Honeywell trades at a higher valuation multiple of 3.4x revenues vs. 1.7x for 3M due to its superior profitability and financial position. However, we believe this gap should narrow over time in favor of 3M, as discussed below.

Interestingly, HON has had a Sharpe Ratio of 0.4 since early 2017, while the figure stood at -0.3 for MMM, lower than 0.6 for the S&P 500 Index over the same period. This compares with the Sharpe of 1.3 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.