The intrinsic value of General Mills , Inc. (NYSE:GIS) shares has been calculated using the 2-stage Discounted Cash Flow (DCF) model, which suggests a potential undervaluation by 45% at the company's current share price of $65.30. The DCF model, which takes into account two growth periods for cash flows - an initial higher growth stage followed by a lower one - estimates a fair value of $119 for General Mills.
The DCF model is based on future cash flow forecasts over the next decade, using analyst forecasts where available or extrapolating from past free cash flow (FCF) figures otherwise. The model assumes that companies with declining FCF will decrease their shrinkage rate and those with rising FCF will experience slower growth rates over time, reflecting the pattern of faster growth slowdown in early years.
This methodology has resulted in an estimated present value for General Mills' 10-year Cash Flow (PVCF) at $22 billion. Despite this, the analyst price target for General Mills stands at $70.96, still 40% below the DCF-derived fair value estimate.
InvestingPro Insights
In light of the potential undervaluation of General Mills, Inc. (NYSE:GIS) shares, it's worth considering some key metrics and insights from InvestingPro. According to the InvestingPro data, the company has a market cap of 37.96B USD and a P/E Ratio of 15.75, with an adjusted P/E Ratio of 14.75 as of Q1 2024. The company's revenue growth has been reported at 5.79% for the last twelve months as of Q1 2024.
InvestingPro Tips reveal that management has been aggressively buying back shares, and the company has raised its dividend for four consecutive years. These actions could potentially signal confidence in the company's future prospects. Additionally, General Mills has been profitable over the last twelve months, which further supports the DCF-derived valuation.
For more in-depth insights and tips, consider checking out the InvestingPro product, which includes a wealth of additional tips and metrics. You can find more about it here.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.