It might not be obvious to the casual observer, but right now, today, General Mills, Inc. (NYSE:GIS) stock offers one of the best values available in the packaged-cereals industry. Why?
General Mills is cheap
When you stack up General Mills, Inc. (NYSE:GIS) stock against two of its bigger rivals — Kellogg Company (NYSE:K) and ConAgra Foods, Inc. (NYSE:CAG), which bought cereal maker Ralcorp late last year — it’s clear that General Mills, Inc. (NYSE:GIS) is the cheapest of the three. Its 17.9 price-to-earnings ratio is a full 25% cheaper than what a share of Kellogg Company (NYSE:K) will set you back. It’s a whopping 34% discount to the P/E ratio at ConAgra Foods, Inc. (NYSE:CAG).
General Mills has the best record around
General Mills, Inc. (NYSE:GIS) stock looks great in the rearview mirror, and nearly as good when viewed through the windshield. Over the past five years, it’s grown its annual sales 25% faster than the closest rival, notching 6% annualized sales growth to ConAgra Foods, Inc. (NYSE:CAG)’s 4.8%. General Mills has outperformed Kellogg’s 3.8% rate of sales growth by an even wider margin — and its profits growth has similarly outperformed all comers.
General Mills pays you best
Perhaps most important to investors, though, is the simple fact that out of the three big cereal concerns discussed above, General Mills, Inc. (NYSE:GIS) is the firm generating the most cash from its business — and gives you the biggest free cash flow bang for the buck.
Measured by dividing a company’s market capitalization (the price you pay for General Mills stock) into its free cash flow (the money your investment generates for you), General Mills, Inc. (NYSE:GIS) offers investors quite simply the best “free cash flow yield” of the three named. Put even more simply, for every dollar you invest in a share of General Mills stock today, you can expect the company to generate nearly 6.9 cents’ worth of real, cash profits on your investment.
General Mills may ultimately use this cash to pay you bigger dividends (it already pays a 3.1% dividend — more than either Kellogg or ConAgra Foods, Inc. (NYSE:CAG)), to buy back shares (increasing the size of your stake in the company for every share it takes off the table), or to reinvest in its business and maintain its lead over rivals for years to come. Any way you look at it, though, General Mills’ ability to generate cash offers investors a great reason to invest.
And that, Fools, is the reason I think now’s a great time to buy General Mills stock.
General Mills is a great brand to invest in, but America is a company populated with many such great brands. For example: The Coca-Cola Company (NYSE:KO)‘s wide moat has helped provide its shareholders with superior gains in the past, but the company faces some new threats to its continued market dominance.
The article It’s Time to Buy General Mills Stock. Here’s Why. originally appeared on Fool.com.
Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
Related tickers: The Coca-Cola Company (NYSE:KO), ConAgra Foods, Inc. (NYSE:CAG), General Mills, Inc. (NYSE:GIS)