General Mills (GIS:NYS) Fundamental Valuation Report


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General Mills $45.22 (USD) Close Price as of 22/06/2018

Based on the analysis conducted in this report, General Mills, (GIS:NYS) is found to be  Undervalued.

Company General Mills
Symbol:Exchange GIS:NYS
Industry Consumer Defensive:Packaged Foods
Close Price/Date $45.22 (USD) 22/06/2018
Weighted Average Valuation $51.32 (USD)
Summary GIS:NYS is found to be  Undervalued by 13.5% using the 3 valuation models shown below.
Valuation Models Used Analyst Consensus: $45.80 (USD)
(in order of importance) Comparables: $54.68 (USD)
Adjusted Book Value: $61.16 (USD)
Valuation Methods Analysis This company is:
Cash Flow Basis: Undervalued on a Cash Flow Valuation basis
Comparable Company Basis: Undervalued on a Comparable Valuation basis
Asset Basis: Undervalued on an Asset Valuation basis

Valuation Details

General Mills Valuations

Summary chart

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for GIS:NYS

Using a discounted cash flow model we generated an intrinsic value of $59.60 (USD) for GIS:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

GIS:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $59.60 1% 5% 1% 5%
WACC (or Ke) 7.17 $78.87 $46.81
Terminal Growth Rate 2.20 $48.00 $77.06
Tax Rate 0.29 $64.98 $54.23
Cash Flow 3,763,208,400 $55.19 $64.02
Capital Expenditures
Long Term Debt 8,871,900,000 $60.38 $58.83

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $54.68 (USD) for GIS:NYS. We also generated a valuation of $44.89 (USD) using other metrics and comparables.
The comparable companies were Campbell Soup (CPB:NYS), Hormel Foods (HRL:NYS), Kraft Heinz (KHC:NAS), Lamb Weston Holdings (LW:NYS) and McCormick & Co (MKC:NYS).

Company GIS:NYS End Date Value
Earnings/Share $3.74 (USD)
Book Value/Share $8.71 (USD)
Sales/Share $26.78 (USD)
Cash Flow/Share $4.77 (USD)
EBITDA/Share $0.00 (USD)
Price Based on Comps Adjustment Factor (%)
$71.54 (USD) -46.1
$38.36 (USD) 0.8
$65.46 (USD) 61.1
$108.58 (USD) -66.8
$0.00 (USD) 8.6
GIS:NYS Ratios Used Average Values CPB:NYS HRL:NYS KHC:NAS LW:NYS MKC:NYS
12.09 PE Ratio 19.13 24.28 20.84 7.00 25.52 18.01
5.19 PB Ratio 4.40 8.27 3.64 1.16 0.00 4.55
1.69 PS Ratio 2.44 1.44 2.10 2.96 2.99 2.74
9.48 PCF Ratio 22.75 8.95 16.72 49.91 19.82 18.36
11.52 EV to EBITDA 17.81 21.79 14.38 13.83 17.49 21.59

Multiples

Using a multiples approach we generated a valuation of  $68.44 (USD) for GIS:NYS

Company GIS:NYS End Date Value
Earnings/Share $3.74 (USD)
Book Value/Share $8.71 (USD)
Sales/Share $26.78 (USD)
Cash Flow/Share $4.77 (USD)
EBITDA/Share $5.43 (USD)
Price Based on Comps Adjustment Factor
$83.09 (USD) 0
$63.04 (USD) 0
$55.67 (USD) 0
$66.10 (USD) 0
$74.29 (USD) 0
Ratios Ratio Average
PE Ratio 22.22
PB Ratio 7.24
PS Ratio 2.08
PCF Ratio 13.85
EV to EBITDA 13.67

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  GIS:NYS for the last 10 years was  7.11

We ran the Adjusted Book Value for  GIS:NYS and generated a book value of  $8.61 (USD)
By multiplying these we get an adjusted valuation of  $61.16 (USD)

Analyst Data

In the Stockcalc database there are 5 analysts that provide a valuation for GIS:NYS. The 5 analysts have a concensus valuation for GIS:NYS for 2019 of $45.80 (USD).

GIS:NYS General Mills

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
1 6 1 3.0000 Hold 2018-6-21

Current Price: not available

Analyst Consensus
USD Millions 2018 2019 2020
Mean EPS 3.02 3.10 3.17
# EPS Analysts 7 7 3
Mean Revenue 15,733.10 17,363.80 17,672.20
# Revenue Analysts 5 5 3
Mean Target Price 45.80
Mean Cash Flow 4.63 4.32 4.29
Mean EBITDA 3,246.70 3,603.90 3,682.20
Mean Net Income 1,861.60 1,869.10 1,974.30
Mean Debt Outstanding 4,693.70 4,558.60 -307.00
Mean Tax Rate 26.00 23.00 23.00
Mean Growth Rate 7.99
Mean Capital Expenditure 663.20 730.20 743.80

Company Overview (GIS:NYS USD)

Price 45.22
Range 44.89 – 45.68
52 week 41.21 – 60.20
Open 44.95
Vol / Avg. 5.85M/2.39M
Mkt cap 25.78B
P/E 12.09
Div/yield 1.96/0.04
EPS 2.77
Shares 570.1M
Beta 0.30

Summary chart

Detailed Company Description

General Mills Inc is a global manufacturer and marketer of branded consumer foods, such as ready-to-eat breakfast cereals, refrigerated dough and other baking items, snack foods, ice cream, and yogurt.

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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