Investors have mostly avoided General Mills (NYSE:GIS) stock since the pandemic began. That's a surprise considering the company has been posting strong financial results for the better part of a year. But the stock's relative weakness makes it look more attractive as an income investment, especially after its recent earnings report that covered the selling period through late February.

Let's take a closer look.

A child eating cereal.

Image source: Getty Images.

Winning share

General Mills' sales beat expectations, with growth landing at 8% in the fiscal third quarter. That marked a slight acceleration from the prior quarter's expansion rate even though most investors were bracing for a slowdown to around 6%.

Management said the results reflected broad-based market share gains as shoppers continued to spend more time cooking and eating at home. General Mills is seeing a persistent growth lift, whether through breakfast brands like Cheerios cereal, the Totino's frozen pizza franchise, or the Pillsbury baking brand.

PepsiCo, for context, grew organic sales by 8% in its Quaker Foods segment this past quarter. General Mills' gains were driven by a good balance between higher prices and rising sales volumes. "We continued to execute well and delivered profitable growth in the third quarter," CEO Jeff Harmening said in a press release.

Cutting costs

Its finances improved, too, thanks to the combination of strong sales growth and rising prices. Gross profit margin increased, helping net earnings jump 31% to $596 million. General Mills has seen adjusted earnings rise 14% in the past nine months, compared to 8% higher sales.

GIS Operating Income (TTM) Chart

GIS Operating Income (TTM) data by YCharts

Cash flow is solid, although not as impressive as some of its industry peers. The company's operating cash is up 2% over the past nine months, while Pepsi's comparable metric jumped 10% in 2020.

Getting more attractive

General Mills issued a bullish short-term outlook that calls for sales to rise for the full year despite the expected slump in the current quarter as compared to the maximum COVID-19 impact from a year ago. Sales soared 16% last year during the first round of retailing and restaurant shutdowns, creating a difficult year-over-year comparison. Yet from there, management is expecting elevated demand levels to persist even as the pandemic threat fades.

There are some drawbacks to General Mills stock, including the company's high debt and the fact that the dividend hasn't budged in the last three years. PepsiCo still looks like the most attractive income investment in this niche.

But investors looking for an over 3% yield might want to keep General Mills on their watch lists. It has a cheaper valuation today. Meanwhile, its market share wins through the pandemic are laying the groundwork for stronger investor returns from here. And its larger customer base, improving margins, and better portfolio all support the stock. While there's more work ahead for the management team, this business likely isn't done surprising Wall Street with its improving results.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.