Why General Mills Stock Is Rated a “Hold” Before Earnings

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By Rob Otman

General Mills (NYSE: GIS) is a $33 billion company today. Investors that bought shares one year ago are sitting on a -13.64% total return. That’s below the S&P 500’s return of 17.81%.

General Mills stock is underperforming the market. It’s beaten down, but it reports earnings next week. So is it a good time to buy? To answer this question, we’ve turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.

Our system looks at six key metrics…

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✗ Earnings-per-Share (EPS) Growth: General Mills reported a recent EPS growth rate of 1.64%. That’s below the food products industry average of 11.4%. That’s not a good sign. We like to see companies that have higher earnings growth.

✓ Price-to-Earnings (P/E): The average price-to-earnings ratio of the food products industry is 24.94. And General Mills’ ratio comes in at 18.63. It’s trading at a better value than many of its competitors.

✗ Debt-to-Equity: The debt-to-equity ratio for General Mills stock is 184.4%. That’s above the food products industry average of 71.94%. That’s not a good sign. General Mills’ debt levels should be lower.

✗ Free Cash Flow per Share Growth: General Mills’ FCF has been lower than that of its competitors over the last year. That’s not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It’s one of our most important fundamental factors.

✓ Profit Margins: The profit margin of General Mills comes in at 9.43% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. General Mills’ profit margin is above the food products average of 7.56%. So that’s a positive indicator for investors.

✓ Return on Equity: Return on equity tells us how much profit a company produces with the money shareholders invest. The ROE for General Mills is 30.58%, and that’s above its industry average ROE of 17.52%.

General Mills stock passes three of our six key metrics today. That’s why our Investment U Stock Grader rates it as a Hold.

Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That’s why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.

If you’re interested in finding Strong Buy stocks yourself, check out Fundamental Analysis Pro. It’s a free five-part mini-course that will teach you how to grade stocks like a Wall Street veteran. Click here to learn more. …read more

Source:: Investment You

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