General Mills, Inc. (GIS), Kellogg Company (K): Still A Good Value After A 20% Gain?

General Mills, Inc. (NYSE:GIS) is one of the leading food producers in the United States with a list of brands that are household names. The company has been one of my favorite “safe” income investments for some time now, and with shares up nearly 20% year-to-date, I feel that now is as good a time as any to re-evaluate. Specifically, what I want to know is should current General Mills, Inc. (NYSE:GIS) shareholders head for the exits with their profits, or are there more gains in store? Let’s take a closer look at the company and a few of the alternatives to see what the best play is.

General Mills, Inc. (NYSE:GIS)

General Mills, Inc. (NYSE:GIS) is well known for its ready-to-eat breakfast cereals, and also produces a wide variety of other packaged food products. The company’s cereal brands include Cheerios, Wheaties, Lucky Charms, and Trix, just to name a few and their other food brands, include Betty Crocker, Bisquick, Progresso, Pillsbury, and many others.

The company’s sales are about $17 billion annually, mostly to grocery store chains. While not generally viewed as a growth stock, there is still significant room for expansion through both international growth and strategic acquisitions. As far as international sales growth is concerned, there is lots of room for expansion, particularly in emerging markets, as General Mills, Inc. (NYSE:GIS)’s international sales account for only about one quarter of the company’s business, up significantly from 19% just last year.

In terms of acquisitions, the company has been fairly active in pursuing companies that can complement their portfolio of brands and create operational synergies to add value to the existing brands. For example, one recent high-profile acquisition was a controlling 51% stake in the Yoplait brand for $1.2 billion, which allows the company to market the yogurt brand in the U.S. Even more recently, General Mills, Inc. (NYSE:GIS) acquired Yoki, a Brazilian food company specializing in snacks, seasonings, and convenient meal products. General Mills, Inc. (NYSE:GIS) said that once the acquisition is fully integrated, it will more than double the company’s Latin American sales.

The Numbers

General Mills trades for 17.6 times TTM earnings, which is slightly above its historic average of around 16, but I feel is justified due to the improving U.S. economy and the company’s commitment to international growth over recent years. General Mills is projected to earn $2.70 per share this year, which is expected to rise to $2.93 and $3.16 in 2014 and 2015, respectively, for annual forward earnings growth of over 8%.