GIS

Read This to Understand General Mills Stock

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.

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.

IN FOCUS