Can General Mills Surge Higher?

With shares of General Mills (NYSE:GIS) trading around $48, is GIS an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

General Mills manufactures and markets branded consumer foods worldwide. The company also supplies branded and unbranded food products to the food service and commercial baking industries. Food is essential for life and General Mills is well-positioned in its sector to provide the products that consumers need around the world. As increasing populations fuel a rise in consumer demand, General Mills is set to profit for many years.

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Head on over to the next page to explore the technical landscape of General Mills’s stock…

T = Technicals on the Stock Chart are Strong

General Mills has been an amazing stock for investors with an uptrend that has remained intact for decades. The stock was one of the more resilient stocks during the 2008 Financial Crisis. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen below, General Mills is trading above all of its rising key averages which signals a strong uptrend in its stock price.

GIS

(Source: Thinkorswim)

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Taking a look at the implied volatility and implied volatility skew levels of General Mills options may help determine if investors are bullish, neutral, or bearish. As seen in the price chart above, the implied volatility (red) of General Mills options is at 14.54 percent today which coincides with a 20th percentile over the last 30 trading days and 18th percentile over the last 90 trading days. What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

The implied volatility skew of April and May put options is flat while call option skew is average. So as of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. Investors are buying a minimal amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Strong Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising growth rates. What do the last four quarterly earnings and revenue growth figures for General Mills look like? The last four quarterly earnings growth (Y-O-Y) rates have been: 3.45, 22.39, 34.43, and 0 percent while the last four revenue growth (Y-O-Y) rates have all been: 7.54, 5.58, 5.29, and 11.89 percent. General Mills has posted excellent earnings and revenue growth rates over the last four quarters.

More importantly, how did the street take these numbers? The last four quarterly earnings announcement reactions help gauge investor sentiment on General Mills’s stock. The last four quarters have seen next trading session returns of 2.56, 0.72, 1.79, and -1.57 percent. The street has very pleased with most of General Mills’s earnings reports.

P = Excellent Relative Performance Versus Peers and Sector

How has General Mills stock done relative to its peers and sector? Year-to-date, the stock is returning 17.67 percent while its competitors, Post (NYSE:POST), Kellogg Company (NYSE:K), J.M. Smucker (NYSE:SJM), and sector are returning 17.92, 12.44, 8.63, and 12.78 percent respectively. General Mills has been one of the relative performance leaders of its sector.

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Conclusion

General Mills provides goods that are essential to human life. The products provided have encountered a great amount of demand over the years. The stock has also witnessed its fair share of demand as investors have been bidding the stock higher on excellent earnings and revenue growth rates. This had led the stock to be one of the relative performance leaders of its sector. Look for General Mills stock to continue to OUTPERFORM.

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