Today we're going to take a closer look at large-cap Consumer Staples company General Mills, whose shares are currently trading at $75.45. 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 17.5 and a P/B ratio of 4.24.
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.
Exceptional Profitability Overshadowed by Excessive Leverage:
| 2019-06-28 | 2020-07-02 | 2021-06-30 | 2022-06-29 | |
|---|---|---|---|---|
| Revenue (MM) | $16,865 | $17,627 | $18,127 | $18,993 |
| Gross Margins | 34.1% | 34.8% | 35.6% | 33.7% |
| Operating Margins | 16.7% | 16.9% | 18.6% | 17.1% |
| Net Margins | 10.39% | 12.37% | 12.91% | 14.25% |
| Net Income (MM) | $1,753 | $2,181 | $2,340 | $2,707 |
| Net Interest Expense (MM) | -$522 | -$466 | -$420 | -$380 |
| Depreciation & Amort. (MM) | -$620 | -$595 | -$601 | -$570 |
| Earnings Per Share | $2.9 | $3.56 | $3.78 | $4.31 |
| EPS Growth | n/a | 22.76% | 6.18% | 14.02% |
| Diluted Shares (MM) | 605 | 613 | 620 | 585 |
| Free Cash Flow (MM) | $3,330 | $4,135 | $3,511 | $3,882 |
| Capital Expenditures (MM) | -$523 | -$459 | -$528 | -$565 |
| Net Current Assets (MM) | -$18,557 | -$17,336 | -$16,314 | -$15,212 |
| Current Ratio | 0.59 | 0.68 | 0.7 | 0.63 |
| Long Term Debt (MM) | $11,625 | $10,929 | $9,787 | $9,135 |
| Net Debt / EBITDA | 5.56 | 4.29 | 4.07 | 3.6 |
General Mills benefits from strong margins with a stable trend, a steady stream of strong cash flows, and stable revenues and a flat capital expenditure trend. The company's financial statements show wider gross margins than its peer group and a strong EPS growth trend. However, the firm has a highly leveraged balance sheet.
