GIS pitch:
– COVID beneficiary set to reverse.
– General Mills is now trading at an elevated valuation on estimates that assume the company returns to its pre-covid margin structure.
– The company has benefited from strong at-home consumption trends, pricing, and a favorable competitive landscape as private label was supply constrained during covid.
– Many of these tailwinds are now set to reverse or at least moderate.
– Valuation multiple has expanded due to better-than-expected earnings over the last year.
– However, General Mills is unlikely to have a significantly different growth and margin profile going forward relative to pre-covid.
GIS valuation:
– Trades at 18.7x FY23 EPS and 17.9x FY24 EPS on currently elevated margins.
– Average historical PE has been 16x-17x.
Exp. gain: Not specified.
Full write-up (free guest account required):
https://www.valueinvestorsclub.com/idea/GENERAL_MILLS_INC/3565196979