Back to top

General Mills (GIS) Hits 52-Week High, Can the Run Continue?

Read MoreHide Full Article

Shares of General Mills (GIS - Free Report) have been strong performers lately, with the stock up 3.3% over the past month. The stock hit a new 52-week high of $55.29 in the previous session. General Mills has gained 41.3% since the start of the year compared to the 17.6% move for the Zacks Consumer Staples sector and the 14.4% return for the Zacks Food - Miscellaneous industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on June 26, 2019, General Mills reported EPS of $0.83 versus consensus estimate of $0.76 while it missed the consensus revenue estimate by 1.56%.

For the current fiscal year, General Mills is expected to post earnings of $3.37 per share on $17.44 billion in revenues. This represents a 4.66% change in EPS on a 3.42% change in revenues. For the next fiscal year, the company is expected to earn $3.51 per share on $17.35 billion in revenues. This represents a year-over-year change of 4.06% and -0.52%, respectively.

Valuation Metrics

General Mills may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

General Mills has a Value Score of C. The stock's Growth and Momentum Scores are B and D, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 16.3X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 12.9X versus its peer group's average of 12.9X. Additionally, the stock has a PEG ratio of 2.33. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, General Mills currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if General Mills fits the bill. Thus, it seems as though General Mills shares could have a bit more room to run in the near term.

How Does General Mills Stack Up to the Competition?

Shares of General Mills have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including Danone (DANOY - Free Report) , MGP Ingredients (MGPI - Free Report) , and MEDIFAST INC (MED - Free Report) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for General Mills. Still, the fundamentals for General Mills are promising, and it still has potential despite being at a 52-week high.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

General Mills, Inc. (GIS) - free report >>

MEDIFAST INC (MED) - free report >>

MGP Ingredients, Inc. (MGPI) - free report >>

Danone (DANOY) - free report >>

Published in