Assessing General Mills Inc’s (NYSE:GIS) past track record of performance is a valuable exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess GIS’s recent performance announced on 27 May 2018 and evaluate these figures to its longer term trend and industry movements.
Could GIS beat the long-term trend and outperform its industry?GIS’s trailing twelve-month earnings (from 27 May 2018) of US$2.13b has jumped 28.59% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 0.69%, indicating the rate at which GIS is growing has accelerated. What’s the driver of this growth? Let’s see if it is solely owing to an industry uplift, or if General Mills has seen some company-specific growth.
In the last couple of years, General Mills grew bottom-line, while its top-line fell, by efficiently managing its costs. This resulted in to a margin expansion and profitability over time. Eyeballing growth from a sector-level, the US food industry has been growing, albeit, at a unexciting single-digit rate of 6.26% over the past twelve months, and 7.84% over the previous five years. This growth is a median of profitable companies of 25 Food companies in US including Fraser and Neave, Greencore Group and Greencore Group. This means any tailwind the industry is deriving benefit from, General Mills is capable of amplifying this to its advantage.In terms of returns from investment, General Mills has invested its equity funds well leading to a 29.76% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 8.18% exceeds the US Food industry of 6.71%, indicating General Mills has used its assets more efficiently. However, its return on capital (ROC), which also accounts for General Mills’s debt level, has declined over the past 3 years from 14.62% to 10.50%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 98.46% to 217.63% over the past 5 years.
What does this mean?
General Mills’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research General Mills to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for GIS’s future growth? Take a look at our free research report of analyst consensus for GIS’s outlook.
- Financial Health: Are GIS’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 27 May 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.