There's a lot to like about the food business. It's predictable, it doesn't go out of style, and most of the companies are mature cash generators, which leads to nice dividend payments. Most of the time, investments with these qualities have more than adequate growth priced into the shares, but that doesn't appear to be the case with General Mills
The company's income statement, balance sheet, and cash flow highlights are in the Fool by Numbers published yesterday. As you might expect, none of the results are spectacular. Sales growth of 4% and operating income growth of around 5% won't set the world on fire.
That said, a basic discounted cash flow analysis, assuming 5% growth in free cash flow for 10 years and 3% thereafter, yields a price about 15% higher than where shares trade today. With a healthy balance sheet and 2.7% yield, that's not a tremendous deal, but it's not so bad either. (Competitor Kellogg
Digging a level deeper into the company's business shows that sales gains were solid in the yogurt, ready-to-serve meals, baking, and international businesses. But there was weakness in the company's Pillsbury USA division and in its U.S. cereal division, where sales declined 1%. In addition, General Mills, like Income Investor pick Sara Lee
Overall, I'm intrigued by General Mills, but more inclined to add to my position in Income Investor selection Unilever
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