Have you been paying attention to shares of General Mills (GIS)? Shares have been on the move with the stock up 2.9% over the past month. The stock hit a new 52-week high of $49.5 in the previous session. General Mills has gained 24% since the start of the year compared to the 10.8% move for the Zacks Consumer Staples sector and the 4.5% 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 March 20, 2019, General Mills reported EPS of $0.83 versus consensus estimate of $0.69 while it beat the consensus revenue estimate by 0.51%.
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 these give investors a variety of ways to comb 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 A. The stock's Growth and Momentum Scores are C and A, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 15.7X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 11.8X versus its peer group's average of 11.9X. Additionally, the stock has a PEG ratio of 2.16. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, General Mills currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
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 meets the list of requirements. 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 rising, 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 solid potential picks, including Sysco (SYY), MGP Ingredients (MGPI), and MEDIFAST INC (MED), 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.
The Zacks Industry Rank is in the top 40% of all the industries we have in our universe, so it looks like there are some nice tailwinds for General Mills, even beyond its own solid fundamental situation.
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General Mills, Inc. (GIS) : Free Stock Analysis Report
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