Here's Why We Think General Mills (NYSE:GIS) Is Well Worth Watching

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like General Mills (NYSE:GIS). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for General Mills

How Fast Is General Mills Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, General Mills has grown EPS by 11% per year. That's a pretty good rate, if the company can sustain it.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. EBIT margins for General Mills remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 7.1% to US$20b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of General Mills' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are General Mills Insiders Aligned With All Shareholders?

Since General Mills has a market capitalisation of US$53b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. We note that their impressive stake in the company is worth US$134m. This comes in at 0.3% of shares in the company, which is a fair amount of a business of this size. This still shows shareholders there is a degree of alignment between management and themselves.

Does General Mills Deserve A Spot On Your Watchlist?

One important encouraging feature of General Mills is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Even so, be aware that General Mills is showing 2 warning signs in our investment analysis , you should know about...

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.