Intrinsic value of General Mills - GIS

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$57.32

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$57.32

 
Intrinsic value

$33.22

 
Up/down potential

-42%

 
Rating

sell

 
Value-price divergence* premium content

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of GIS stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 33.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -6.05
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  16,563
  16,894
  17,283
  17,727
  18,226
  18,778
  19,384
  20,045
  20,759
  21,529
  22,355
  23,239
  24,182
  25,187
  26,254
  27,386
  28,587
  29,857
  31,201
  32,620
  34,119
  35,700
  37,368
  39,126
  40,979
  42,929
  44,983
  47,145
  49,420
  51,814
  54,331
Variable operating expenses, $m
 
  14,883
  15,205
  15,574
  15,987
  16,445
  16,948
  17,496
  18,088
  18,727
  19,412
  19,271
  20,053
  20,885
  21,770
  22,710
  23,705
  24,758
  25,872
  27,049
  28,292
  29,604
  30,987
  32,444
  33,980
  35,598
  37,301
  39,094
  40,981
  42,965
  45,053
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  13,856
  14,883
  15,205
  15,574
  15,987
  16,445
  16,948
  17,496
  18,088
  18,727
  19,412
  19,271
  20,053
  20,885
  21,770
  22,710
  23,705
  24,758
  25,872
  27,049
  28,292
  29,604
  30,987
  32,444
  33,980
  35,598
  37,301
  39,094
  40,981
  42,965
  45,053
Operating income, $m
  2,707
  2,011
  2,077
  2,153
  2,238
  2,333
  2,436
  2,549
  2,671
  2,803
  2,944
  3,969
  4,130
  4,301
  4,484
  4,677
  4,882
  5,099
  5,328
  5,571
  5,827
  6,097
  6,382
  6,682
  6,998
  7,331
  7,682
  8,051
  8,440
  8,848
  9,278
EBITDA, $m
  3,315
  3,187
  3,260
  3,344
  3,438
  3,542
  3,656
  3,781
  3,916
  4,061
  4,217
  4,383
  4,561
  4,751
  4,952
  5,166
  5,392
  5,632
  5,885
  6,153
  6,435
  6,734
  7,048
  7,380
  7,729
  8,097
  8,485
  8,892
  9,322
  9,773
  10,248
Interest expense (income), $m
  292
  268
  280
  293
  308
  325
  343
  364
  386
  410
  436
  464
  494
  526
  560
  596
  635
  675
  718
  764
  812
  863
  916
  973
  1,032
  1,095
  1,161
  1,230
  1,304
  1,381
  1,462
Earnings before tax, $m
  2,404
  1,743
  1,798
  1,860
  1,931
  2,008
  2,093
  2,185
  2,285
  2,392
  2,507
  3,504
  3,635
  3,775
  3,923
  4,081
  4,247
  4,423
  4,610
  4,807
  5,015
  5,234
  5,465
  5,709
  5,966
  6,236
  6,521
  6,821
  7,136
  7,468
  7,817
Tax expense, $m
  756
  471
  485
  502
  521
  542
  565
  590
  617
  646
  677
  946
  982
  1,019
  1,059
  1,102
  1,147
  1,194
  1,245
  1,298
  1,354
  1,413
  1,476
  1,541
  1,611
  1,684
  1,761
  1,842
  1,927
  2,016
  2,111
Net income, $m
  1,697
  1,272
  1,312
  1,358
  1,409
  1,466
  1,528
  1,595
  1,668
  1,746
  1,830
  2,558
  2,654
  2,756
  2,864
  2,979
  3,100
  3,229
  3,365
  3,509
  3,661
  3,821
  3,990
  4,168
  4,355
  4,553
  4,760
  4,979
  5,209
  5,452
  5,706

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  764
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  21,712
  21,358
  21,849
  22,411
  23,041
  23,740
  24,506
  25,341
  26,244
  27,218
  28,262
  29,380
  30,572
  31,842
  33,191
  34,623
  36,140
  37,746
  39,444
  41,239
  43,134
  45,133
  47,242
  49,464
  51,806
  54,272
  56,869
  59,602
  62,478
  65,504
  68,687
Adjusted assets (=assets-cash), $m
  20,948
  21,358
  21,849
  22,411
  23,041
  23,740
  24,506
  25,341
  26,244
  27,218
  28,262
  29,380
  30,572
  31,842
  33,191
  34,623
  36,140
  37,746
  39,444
  41,239
  43,134
  45,133
  47,242
  49,464
  51,806
  54,272
  56,869
  59,602
  62,478
  65,504
  68,687
Revenue / Adjusted assets
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
Average production assets, $m
  8,372
  8,532
  8,728
  8,952
  9,204
  9,483
  9,789
  10,123
  10,483
  10,872
  11,289
  11,736
  12,212
  12,719
  13,258
  13,830
  14,436
  15,078
  15,756
  16,473
  17,230
  18,029
  18,871
  19,759
  20,694
  21,679
  22,717
  23,808
  24,957
  26,166
  27,437
Working capital, $m
  -1,078
  -473
  -484
  -496
  -510
  -526
  -543
  -561
  -581
  -603
  -626
  -651
  -677
  -705
  -735
  -767
  -800
  -836
  -874
  -913
  -955
  -1,000
  -1,046
  -1,096
  -1,147
  -1,202
  -1,260
  -1,320
  -1,384
  -1,451
  -1,521
Total debt, $m
  8,431
  7,988
  8,364
  8,793
  9,276
  9,810
  10,396
  11,035
  11,726
  12,470
  13,270
  14,124
  15,037
  16,008
  17,040
  18,135
  19,296
  20,525
  21,824
  23,197
  24,646
  26,176
  27,789
  29,489
  31,281
  33,167
  35,154
  37,245
  39,445
  41,760
  44,194
Total liabilities, $m
  16,782
  16,339
  16,715
  17,144
  17,627
  18,161
  18,747
  19,386
  20,077
  20,821
  21,621
  22,475
  23,388
  24,359
  25,391
  26,486
  27,647
  28,876
  30,175
  31,548
  32,997
  34,527
  36,140
  37,840
  39,632
  41,518
  43,505
  45,596
  47,796
  50,111
  52,545
Total equity, $m
  4,930
  5,019
  5,135
  5,267
  5,415
  5,579
  5,759
  5,955
  6,167
  6,396
  6,642
  6,904
  7,184
  7,483
  7,800
  8,136
  8,493
  8,870
  9,269
  9,691
  10,136
  10,606
  11,102
  11,624
  12,174
  12,754
  13,364
  14,007
  14,682
  15,393
  16,141
Total liabilities and equity, $m
  21,712
  21,358
  21,850
  22,411
  23,042
  23,740
  24,506
  25,341
  26,244
  27,217
  28,263
  29,379
  30,572
  31,842
  33,191
  34,622
  36,140
  37,746
  39,444
  41,239
  43,133
  45,133
  47,242
  49,464
  51,806
  54,272
  56,869
  59,603
  62,478
  65,504
  68,686
Debt-to-equity ratio
  1.710
  1.590
  1.630
  1.670
  1.710
  1.760
  1.810
  1.850
  1.900
  1.950
  2.000
  2.050
  2.090
  2.140
  2.180
  2.230
  2.270
  2.310
  2.350
  2.390
  2.430
  2.470
  2.500
  2.540
  2.570
  2.600
  2.630
  2.660
  2.690
  2.710
  2.740
Adjusted equity ratio
  0.212
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235
  0.235

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,697
  1,272
  1,312
  1,358
  1,409
  1,466
  1,528
  1,595
  1,668
  1,746
  1,830
  2,558
  2,654
  2,756
  2,864
  2,979
  3,100
  3,229
  3,365
  3,509
  3,661
  3,821
  3,990
  4,168
  4,355
  4,553
  4,760
  4,979
  5,209
  5,452
  5,706
Depreciation, amort., depletion, $m
  608
  1,176
  1,183
  1,190
  1,199
  1,209
  1,220
  1,232
  1,245
  1,258
  1,273
  415
  432
  449
  468
  489
  510
  533
  557
  582
  609
  637
  667
  698
  731
  766
  803
  841
  882
  925
  970
Funds from operations, $m
  2,783
  2,448
  2,495
  2,549
  2,609
  2,675
  2,748
  2,827
  2,912
  3,005
  3,103
  2,973
  3,085
  3,205
  3,332
  3,467
  3,611
  3,762
  3,922
  4,091
  4,270
  4,458
  4,657
  4,866
  5,086
  5,319
  5,563
  5,820
  6,091
  6,376
  6,676
Change in working capital, $m
  153
  -9
  -11
  -12
  -14
  -15
  -17
  -18
  -20
  -22
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -70
Cash from operations, $m
  2,630
  2,368
  2,506
  2,561
  2,623
  2,691
  2,765
  2,845
  2,932
  3,026
  3,126
  2,998
  3,112
  3,233
  3,362
  3,499
  3,644
  3,797
  3,960
  4,131
  4,312
  4,502
  4,703
  4,915
  5,138
  5,373
  5,621
  5,881
  6,155
  6,443
  6,746
Maintenance CAPEX, $m
  0
  -296
  -301
  -308
  -316
  -325
  -335
  -346
  -358
  -370
  -384
  -399
  -415
  -432
  -449
  -468
  -489
  -510
  -533
  -557
  -582
  -609
  -637
  -667
  -698
  -731
  -766
  -803
  -841
  -882
  -925
New CAPEX, $m
  -729
  -160
  -196
  -224
  -252
  -279
  -306
  -333
  -361
  -389
  -417
  -446
  -476
  -507
  -539
  -572
  -606
  -642
  -678
  -717
  -757
  -799
  -842
  -888
  -935
  -985
  -1,037
  -1,092
  -1,149
  -1,209
  -1,271
Cash from investing activities, $m
  93
  -456
  -497
  -532
  -568
  -604
  -641
  -679
  -719
  -759
  -801
  -845
  -891
  -939
  -988
  -1,040
  -1,095
  -1,152
  -1,211
  -1,274
  -1,339
  -1,408
  -1,479
  -1,555
  -1,633
  -1,716
  -1,803
  -1,895
  -1,990
  -2,091
  -2,196
Free cash flow, $m
  2,723
  1,913
  2,008
  2,028
  2,054
  2,086
  2,124
  2,166
  2,214
  2,267
  2,325
  2,152
  2,221
  2,295
  2,374
  2,459
  2,549
  2,646
  2,748
  2,857
  2,973
  3,095
  3,224
  3,360
  3,505
  3,657
  3,817
  3,987
  4,165
  4,353
  4,550
Issuance/(repayment) of debt, $m
  -782
  321
  376
  430
  482
  534
  586
  638
  691
  745
  799
  855
  912
  971
  1,032
  1,095
  1,161
  1,229
  1,299
  1,373
  1,450
  1,530
  1,613
  1,700
  1,791
  1,887
  1,986
  2,091
  2,200
  2,315
  2,435
Issuance/(repurchase) of shares, $m
  -435
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,214
  321
  376
  430
  482
  534
  586
  638
  691
  745
  799
  855
  912
  971
  1,032
  1,095
  1,161
  1,229
  1,299
  1,373
  1,450
  1,530
  1,613
  1,700
  1,791
  1,887
  1,986
  2,091
  2,200
  2,315
  2,435
Total cash flow (excl. dividends), $m
  1,502
  2,234
  2,384
  2,458
  2,537
  2,621
  2,710
  2,805
  2,905
  3,011
  3,124
  3,007
  3,133
  3,266
  3,406
  3,554
  3,710
  3,874
  4,048
  4,230
  4,422
  4,624
  4,837
  5,061
  5,296
  5,544
  5,804
  6,077
  6,365
  6,667
  6,985
Retained Cash Flow (-), $m
  67
  -89
  -115
  -132
  -148
  -164
  -180
  -196
  -212
  -229
  -245
  -263
  -280
  -298
  -317
  -336
  -357
  -377
  -399
  -422
  -445
  -470
  -495
  -522
  -550
  -580
  -610
  -642
  -676
  -711
  -748
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  2,144
  2,268
  2,326
  2,389
  2,457
  2,530
  2,608
  2,693
  2,783
  2,879
  2,744
  2,853
  2,967
  3,089
  3,218
  3,353
  3,497
  3,649
  3,808
  3,977
  4,154
  4,341
  4,538
  4,746
  4,964
  5,194
  5,435
  5,689
  5,956
  6,237
Discount rate, %
 
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.20
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.37
  29.79
  31.28
PV of cash for distribution, $m
 
  1,993
  1,946
  1,827
  1,705
  1,579
  1,452
  1,323
  1,195
  1,068
  944
  760
  658
  562
  474
  393
  321
  257
  203
  157
  118
  88
  63
  45
  31
  21
  13
  9
  5
  3
  2
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

General Mills, Inc. manufactures and markets branded consumer foods in the United States. It operates in three segments: U.S. Retail, International, and Convenience Stores and Foodservice. The company offers ready-to-eat cereals, refrigerated yogurt, soup, meal kits, refrigerated and frozen dough products, dessert and baking mixes, frozen pizza and pizza snacks, grain and fruit and savory snacks, stable and frozen vegetables, and ice cream and frozen desserts, as well as various organic products, including meal kits, granola bars, and cereal. The company markets its products under the Annie’s, Betty Crocker, Bisquick, Bugles, Cascadian Farm, Cheerios, Chex, Cinnamon Toast Crunch, Cocoa Puffs, Cookie Crisp, Fiber One, Food Should Taste Good, Fruit by the Foot, Fruit Gushers, Fruit Roll-Ups, Gardetto’s, Go-Gurt, Gold Medal, Golden Grahams, Häagen-Dazs, Helpers, Jeno’s, Jus-Rol, Kitano, Kix, La Salteña, Lärabar, Latina, Liberté, Lucky Charms, Muir Glen, Nature Valley, Oatmeal Crisp, Old El Paso, Pillsbury, Progresso, Raisin Nut Bran, Total, Totino’s, Trix, Wanchai Ferry, Wheaties, Yoki, and Yoplait names. General Mills, Inc. also supplies branded and unbranded food products to the foodservice and commercial baking industries. It sells its products directly, as well as through broker and distribution arrangements to grocery stores, mass merchandisers, membership stores, natural food chains, e-commerce grocery providers, commercial and noncommercial foodservice distributors and operators, restaurants, and convenience stores, as well as drug, dollar, and discount chains. The company operates 530 ice cream parlors; and franchises 344 branded ice cream parlors. General Mills, Inc. also exports its products primarily to Caribbean and Latin American markets. The company was founded in 1928 and is headquartered in Minneapolis, Minnesota.

FINANCIAL RATIOS  of  General Mills (GIS)

Valuation Ratios
P/E Ratio 20.2
Price to Sales 2.1
Price to Book 6.9
Price to Tangible Book
Price to Cash Flow 13
Price to Free Cash Flow 18
Growth Rates
Sales Growth Rate -6.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 2.4%
Cap. Spend. - 3 Yr. Gr. Rate 3.5%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 143.2%
Total Debt to Equity 171%
Interest Coverage 9
Management Effectiveness
Return On Assets 8.7%
Ret/ On Assets - 3 Yr. Avg. 8%
Return On Total Capital 12.3%
Ret/ On T. Cap. - 3 Yr. Avg. 10.9%
Return On Equity 34.2%
Return On Equity - 3 Yr. Avg. 27.7%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 35.3%
Gross Margin - 3 Yr. Avg. 35.2%
EBITDA Margin 19.9%
EBITDA Margin - 3 Yr. Avg. 18.2%
Operating Margin 16.3%
Oper. Margin - 3 Yr. Avg. 14.9%
Pre-Tax Margin 14.5%
Pre-Tax Margin - 3 Yr. Avg. 13.1%
Net Profit Margin 10.2%
Net Profit Margin - 3 Yr. Avg. 9.1%
Effective Tax Rate 31.4%
Eff/ Tax Rate - 3 Yr. Avg. 32.7%
Payout Ratio 63.2%

GIS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GIS stock intrinsic value calculation we used $16563 million for the last fiscal year's total revenue generated by General Mills. The default revenue input number comes from 2016 income statement of General Mills. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our GIS stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.6%, whose default value for GIS is calculated based on our internal credit rating of General Mills, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of General Mills.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of GIS stock the variable cost ratio is equal to 88.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for GIS stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for General Mills.

Corporate tax rate of 27% is the nominal tax rate for General Mills. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the GIS stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for GIS are equal to 50.5%.

Life of production assets of 28.3 years is the average useful life of capital assets used in General Mills operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for GIS is equal to -2.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $4930 million for General Mills - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 578.392 million for General Mills is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of General Mills at the current share price and the inputted number of shares is $33.2 billion.


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COMPANY NEWS

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▶ [$$] General Mills Operating Chief to Become CEO   [11:24AM  The Wall Street Journal]
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▶ General Mills Bets on Mushroom Bars   [Apr-05-17 09:43AM  Investopedia]
▶ Why Amazon Wants Brands to Bypass Wal-Mart   [Mar-30-17 01:30PM  Bloomberg Video]
▶ Analysts Bite General Mills, Downgrade to Hold   [03:49PM  at Investopedia]
▶ General Mills Reports Mixed Q4 Results   [04:21PM  at Investopedia]
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Stock chart of GIS Financial statements of GIS Annual reports of GIS
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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