General Mills (GIS:NYS) Fundamental Valuation Report

Fundamental Valuation Report

General Mills(GIS:NYS)

Consumer Defensive:Packaged Foods

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Close Price/Date
$53.55 (USD) 02/07/2019

Weighted Valuation
$56.19 (USD)

Overall Rating
Fairly valued to slightly Undervalued by 4.9%

Valuation Models Analyst Consensus: $49.33 (USD)
(in order of importance) Comparables: $66.47 (USD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Undervalued on a Comparable Valuation
Asset: Undervalued on an Asset Valuation

Company Overview (GIS:NYS USD)

Price 53.55
Range 53.01 – 53.68
52 week 36.70 – 54.02
Open 53.44
Vol / Avg. 3.7M/4.64M
Mkt cap 32.1B
P/E 18.39
Div/yield 1.96/0.04
EPS 2.90
Shares 601.96M
Beta 0.78

Company Description

General Mills Inc manufactures branded consumer foods, like ready-to-eat cereals, convenient meals, snacks, yogurt, baking mixes, and ice cream, to retail and food-service customers. Its key brands include Cheerios, Betty Crocker, Haagen-Dazs, Pillsbury, Nature Valley, Old El Paso, Annie’s, and Yoplait. The North America retail segment contributed roughly two-thirds of sales and above three-fourths of operating profits in fiscal 2018. More than 70% of General Mills’ revenue is generated in the United States. The firm is poised to bolster its presence in the natural and organics aisle with its acquisition of Blue Buffalo (now its pet segment), a natural pet food brand.

Valuation Details

 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 $67.54 (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: $67.54 1% 5% 1% 5%
WACC (or Ke) 6.34 $87.96 $53.88
Terminal Growth Rate 1.30 $55.13 $86.07
Tax Rate 0.18 $72.53 $62.54
Cash Flow 3,639,405,100 $62.77 $72.30
Capital Expenditures -650,220,000 $66.76 $68.31
Long Term Debt 8,871,900,000 $68.27 $66.80

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

Comparables Model

Using similar companies and price based ratios we generated a valuation of $66.47 (USD) for GIS:NYS. We also generated a valuation of $55.43 (USD) using other metrics and comparables.
The comparable companies were McCormick & Co (MKC:NYS), Kraft Heinz (KHC:NAS), Campbell Soup (CPB:NYS), Lamb Weston Holdings (LW:NYS) and Hormel Foods (HRL:NYS).

Company GIS:NYS End Date Value
Earnings/Share $2.90 (USD)
Book Value/Share $11.72 (USD)
Sales/Share $27.86 (USD)
Cash Flow/Share $4.64 (USD)
EBITDA/Share $5.33 (USD)
Price Based on Comps Adjustment Factor (%)
$125.59 (USD) -46.1
$59.54 (USD) 0.8
$63.02 (USD) 61.1
$50.58 (USD) -66.8
$96.26 (USD) 8.5
18.11 PE Ratio 43.31 30.33 0.00 100.18 20.44 22.27
4.48 PB Ratio 5.08 6.09 0.73 9.83 0.00 3.67
1.89 PS Ratio 2.26 3.82 1.44 1.20 2.54 2.31
11.33 PCF Ratio 16.07 23.01 14.70 8.47 15.17 19.00
14.14 EV to EBITDA 18.05 22.58 0.00 19.95 14.40 15.25


Using a multiples approach we generated a valuation of  $66.90 (USD) for GIS:NYS

Company GIS:NYS End Date Value
Earnings/Share $2.90 (USD)
Book Value/Share $11.72 (USD)
Sales/Share $27.86 (USD)
Cash Flow/Share $4.64 (USD)
EBITDA/Share $5.33 (USD)
Price Based on Comps Adjustment Factor
$63.34 (USD) 0
$79.45 (USD) 0
$56.29 (USD) 0
$62.21 (USD) 0
$73.23 (USD) 0
Ratios Ratio Average
PE Ratio 21.84
PB Ratio 6.78
PS Ratio 2.02
PCF Ratio 13.42
EV to EBITDA 13.73

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  GIS:NYS for the last 10 years was  6.62

We ran the Adjusted Book Value for  GIS:NYS and generated a book value of  $11.72 (USD)
By multiplying these we get an adjusted valuation of  $77.61 (USD)

Analyst Data

In the Stockcalc database there are 3 analysts that provide a valuation for GIS:NYS. The 3 analysts have a concensus valuation for GIS:NYS for 2020 of $49.33 (USD).

GIS:NYS General Mills

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
0 3 1 2.8000 Hold 2019-7-1

Current Price: 53.55 USD

Analyst Consensus
USD Millions 2020 2021 2022
Mean EPS 3.27 3.05 3.37
# EPS Analysts 5 3 1
Mean Revenue 17,309.00 17,377.90 17,406.70
# Revenue Analysts 3 2 1
Mean Target Price 49.33
Mean Cash Flow 4.50 4.29
Mean EBITDA 3,619.70 3,674.30 3,592.70
Mean Net Income 2,038.70 1,895.60 2,071.30
Mean Debt Outstanding 12,970.00 12,022.60 11,145.50
Mean Tax Rate
Mean Growth Rate 3.81
Mean Capital Expenditure 643.30 675.70 593.30

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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