Today we're going to take a closer look at large-cap Consumer Staples company General Mills, whose shares are currently trading at $65.27. 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 Very Low P/E Ratio 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 15.1 and a P/B ratio of 3.66.
General Mills's PEG ratio is 1.87, 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:
| 2017-06-29 | 2018-06-29 | 2019-06-28 | 2020-07-02 | 2021-06-30 | 2022-06-29 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $15,620 | $15,740 | $16,865 | $17,627 | $18,127 | $18,993 |
| Gross Margins | 36.0% | 34.0% | 34.0% | 35.0% | 36.0% | 34.0% |
| Operating Margins | 18% | 17% | 17% | 17% | 19% | 17% |
| Net Margins | 11.0% | 14.0% | 10.0% | 12.0% | 13.0% | 14.0% |
| Net Income (MM) | $1,658 | $2,131 | $1,753 | $2,181 | $2,340 | $2,707 |
| Net Interest Expense (MM) | -$295 | -$374 | -$522 | -$466 | -$420 | -$380 |
| Depreciation & Amort. (MM) | -$604 | -$619 | -$620 | -$595 | -$601 | -$570 |
| Earnings Per Share | $2.77 | $3.64 | $2.9 | $3.56 | $3.78 | $4.37 |
| EPS Growth | n/a | 31.41% | -20.33% | 22.76% | 6.18% | 15.61% |
| Diluted Shares (MM) | 598 | 586 | 605 | 613 | 620 | 619 |
| Free Cash Flow (MM) | $3,095 | $3,462 | $3,330 | $4,135 | $3,511 | $3,882 |
| Capital Expenditures (MM) | -$680 | -$621 | -$523 | -$459 | -$528 | -$565 |
| Net Current Assets (MM) | -$13,066 | -$20,008 | -$18,557 | -$17,336 | -$16,314 | -$15,212 |
| Long Term Debt (MM) | $7,643 | $12,669 | $11,625 | $10,929 | $9,787 | $9,135 |
| Net Debt / EBITDA | 2.59 | 4.68 | 4.08 | 3.32 | 2.8 | 2.89 |
General Mills has strong margins with a stable trend, wider gross margins than its peer group, and positive EPS growth. However, the firm has a highly leveraged balance sheet. Finally, we note that General Mills has weak revenue growth and a flat capital expenditure trend and irregular cash flows.
