3M (MMM 0.13%) shares have lost about half their value in the last two years as the company has grappled with a series of issues while struggling to find a catalyst to send the stock higher.

The industrial conglomerate is reportedly nearing a settlement to resolve massive potential environmental liabilities. The settlement in and of itself is not going to solve all that ails 3M. But for investors, it might be an ample reason to give this one-time outperformer a fresh look.

Clearing a massive liability overhang

3M is among the world's largest manufacturers of per-and polyfluoroalkyl chemicals, or PFAS, which, among other things, have been used to make fire suppression foams. PFAS is today regarded by some as "forever chemicals" that stay in the environment well after their intended use and have some association with cancer and other long-term illnesses.

That has led to lawsuits by municipalities seeking funds to clean up sites and purify the water table, as well as by firefighters and other first responders who believe the chemicals impacted their health. As litigation talk has grown, investors have become more concerned about how much liability 3M might have.

It appears investors might soon have some clarity on the issue. On Friday, Bloomberg reported that 3M has reached a tentative settlement of at least $10 billion to resolve water pollution claims tied to these forever chemicals.

An important first step...

3M declined to comment on the report, but the shares traded up more than 10% on the settlement talk. If the deal is confirmed, the stock could climb even higher. Shares of rival chemical company Chemours traded up as much as 25% after it reached a separate settlement to resolve similar claims.

Although $10 billion would be a massive figure, it would at least clear up some of the investor uncertainty around how much exposure 3M has. The company had $4 billion in cash on its balance sheet as of the end of the most recent quarter and the ability to borrow more. But the settlement is sure to raise new concerns about the viability of 3M's dividend, an important question for a company with a long history of dividend payouts.

Investors should note that a settlement, even if approved, is unlikely to be the last word concerning PFAS chemicals. If this deal is like the one Chemours and others have struck, it would not settle individual personal-injury claims. 3M also has other litigation concerns, including product liability claims relating to earplugs it sold to the U.S. military.

... but there is a long journey ahead

A PFAS settlement would be a big win for 3M, but the company is still very early into what is likely to be a multiyear turnaround. In May, 3M announced a restructuring that included cutting 6,000 jobs and streamlining its global footprint, toward a goal of improving operating income by $700 million to $900 million annually.

The company believes the plan can improve margins by 200 to 300 basis points. But just weeks after announcing the plan, 3M was forced to dismiss newly promoted group president Michael Vale, one of the architects of the turnaround, for personal reasons.

More broadly, investors are searching for signs that the innovation engine that once made 3M one of the nation's top manufacturers can be resuscitated. The days of 3M employees stumbling onto inventions including Post-it notes and Scotch tape while working in labs seem long gone. Of late, the company has been more focused on financial engineering, including revamping the portfolio via divestitures and acquisitions.

Add to the mix the uncertain macroeconomic environment, and there is little reason for investors to rush into 3M shares right now. The PFAS settlement would remove one massive worry for investors, but there are still plenty of reasons to be cautious about 3M.