General Mills (GIS) Takes a Dip – Firm Fundamentals Indicate Potential Opportunity

Today we're going to take a closer look at large-cap Consumer Staples company General Mills, whose shares are currently trading at $74.81. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!

A Lower P/E Ratio Than Its Sector Average but Trades Above Its Graham Number:

General Mills, Inc. manufactures and markets branded consumer foods worldwide. The company belongs to the Consumer Staples sector, which has an average price to earnings (P/E) ratio of 24.36 and an average price to book (P/B) ratio of 4.29. In contrast, General Mills has a trailing 12 month P/E ratio of 17.4 and a P/B ratio of 4.2.

General Mills's PEG ratio is 2.11, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

Growing Revenues With Increasing Reinvestment in the Business:

2020-05-31 2021-05-31 2022-05-31 2023-05-31
Revenue (MM) $17,627 $18,127 $18,993 $20,094
Gross Margins 34.8% 35.6% 33.7% 32.6%
Operating Margins 16.9% 18.6% 17.1% 15.2%
Net Margins 12.37% 12.91% 14.25% 12.91%
Net Income (MM) $2,181 $2,340 $2,707 $2,594
Net Interest Expense (MM) -$466 -$420 -$380 -$382
Depreciation & Amort. (MM) -$595 -$601 -$570 -$547
Earnings Per Share $3.56 $3.78 $4.42 $4.31
EPS Growth n/a 6.18% 16.93% -2.49%
Diluted Shares (MM) 613 619 613 585
Free Cash Flow (MM) $3,215 $2,452 $2,747 $2,089
Capital Expenditures (MM) -$461 -$531 -$569 -$690
Net Current Assets (MM) -$16,791 -$15,709 -$15,212 -$15,575
Current Ratio 0.68 0.7 0.63 0.69
Long Term Debt (MM) $10,929 $9,787 $9,135 $9,965
Net Debt / EBITDA 3.19 2.78 2.6 2.69

General Mills benefits from growing revenues and increasing reinvestment in the business, strong margins with a stable trend, and a steady stream of strong cash flows. The company's financial statements show wider gross margins than its peer group and positive EPS growth. Furthermore, General Mills has significant leverage.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.