Many novice investors will freak out when there’s a stock market crash or correction. They shouldn’t, of course, because such downturns will inevitably happen now and then. Indeed, after a crash is an excellent time to go shopping for new stocks for your portfolio, because many great companies’ shares will be on sale.
Here’s a stock you might want to consider for your own long-term portfolio: General Mills (NYSE: GIS). If the market drops, its price will become even more attractive, but you might not even want to wait, because its shares already seem undervalued.
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Meet General Mills
General Mills has been around for 160 years. It traces its roots back to a Minnesota flour mill established in 1866. It bought Häagen-Dazs in 1983, Pillsbury in 2001, and Blue Buffalo in 2018. Today, with a recent market value near $18 billion, it’s a food powerhouse, with brands including Annie’s, Betty Crocker, Bisquick, Cascadian Farm, Cheerios, Chex, Cinnamon Toast Crunch, Gold Medal, Green Giant, Kix, Larabar, Nature Valley, Old El Paso, Progresso, Totino’s, Wanchai Ferry, and Wheaties — among many others.
Should you invest in General Mills?
It’s worth considering an investment in General Mills, because the shares are looking rather appealingly priced, with a recent forward-looking price-to-earnings (P/E) ratio of 10.4 well below the five-year average of 15.3, and a recent price-to-sales ratio of 1.0 well below the five-year average of 1.9.
Note, though, that General Mills has been facing some headwinds lately, with management pointing to several that affected its third quarter: retailer inventories, weather-related supply chain disruptions, along with brand-improving investments, divestitures, and unfavorable trade expense timing, among others. It noted, though, that these “timing headwinds [are] expected to become tailwinds in Q4.”
Those factors were enough to result in the following for the third quarter:
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Net sales of $4.4 billion, down 8% year over year, with organic net sales down 3%.
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Operating profit of $525 million, down 41% year over year, with adjusted operating profit down 32% in constant currency.
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Diluted earnings per share (EPS) of $0.56, down 50% year over year — and down 37% in constant currency.
Those are not ideal numbers, but remember the powerful brands under the company’s roof, and that the company has been working to turn things around — by divesting some businesses and investing more heavily in others. Best of all, anyone who has considered the risks and is willing to invest now and wait can collect a very fat dividend, which recently yielded 7.2%. The company has also been repurchasing shares (which rewards shareholders by making remaining shares more valuable), sending its total shareholder yield up to 11.7%. (General Mills has paid a dividend for 127 consecutive years.)
