General Mills Stable & Modest

General Mills Inc. (GIS - Analyst Report), headquartered in Minneapolis, Minnesota, is a global consumer food company. Productivity initiatives and new product introductions should help the company achieve high single-digit earnings growth in the long term. Management has also implemented a strategy to enhance shareholder value. However, higher input commodity costs are impeding meaningful margin expansion. The stock is rated a Hold.

During the last four years, a period of relatively stable and modest earnings growth, General Mills’ stock has traded in a narrow P/E range of 15 to 19. The stock is currently trading at a P/E multiple of 18.3. Given that the company resumed its share buyback program in fiscal 2006 and is exhibiting modest EPS growth, we expect the stock to trade in the top-end of the historical valuation range; hence, the target price of $70.25 is based on a 19 P/E on trailing 12 month earnings.

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