Don't Take a Position in General Mills Stocks Without Knowing Its Fundamentals!

Now trading at a price of $63.93, General Mills has moved -0.2% so far today.

General Mills returned losses of -17.0% last year, with its stock price reaching a high of $90.89 and a low of $63.7. Over the same period, the stock underperformed the S&P 500 index by -37.0%. As of April 2023, the company's 50-day average price was $69.89. General Mills, Inc. manufactures and markets branded consumer foods worldwide. Based in Minneapolis, MN, the large-cap Consumer Staples company has 34,000 full time employees. General Mills has offered a 3.5% dividend yield over the last 12 months.

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.

A Very Low P/E Ratio but Trades Above Its Graham Number:

General Mills has a trailing twelve month P/E ratio of 17.0, compared to an average of 24.36 for the Consumer Staples sector. Based on its EPS guidance of $4.71, the company has a forward P/E ratio of 14.8. The company doesn't issue forward earnings guidance, and the compound average growth rate of its last 6 years of reported EPS is 6.8%. On this basis, the company's PEG ratio is 2.52, which suggests that it is overpriced. In contrast, the market is likely undervaluing General Mills in terms of its equity because its P/B ratio is 3.62 while the sector average is 4.29. The company's shares are currently trading 54.5% above their Graham number.

There's an Analyst Consensus of Some Upside Potential for General Mills:

The 17 analysts following General Mills have set target prices ranging from $58.0 to $77.0 per share, for an average of $70.35 with a hold rating. As of April 2023, the company is trading -0.7% away from its average target price, indicating that there is an analyst consensus of some upside potential.

General Mills has an average amount of shares sold short because 2.3% of the company's shares are sold short. Institutions own 79.1% of the company's shares, and the insider ownership rate stands at 0.23%, suggesting a small amount of insider investors. The largest shareholder is Blackrock Inc., whose 9% stake in the company is worth $3,497,861,945.

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.