General Mills (GIS)

Total return at 5 years: 12.1%/year = 5.0% appreciation + 7.1% dividend. The target price ($42) is ex-dividend; the $13 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $71 · Multiples $45) exceeds the market price ($33).

Today — fairly valued: at $33 trades ~26.8% below its value discounted to today (~$45); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — Infravalorado: the target price ($42) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$29.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($33) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-17.3%/year) than we project (-1.6%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$0.7 bn of owner earnings in year 5 (vs ~$1.7 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). Cash accumulates the retained surplus —what is not returned as dividend or buyback—, so that EV falls and multiples compress going forward. The valuation is done on Utilidad neta ajustada (P/E). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Branded consumer staple in structural decline: valued at P/E on adjusted net income, which gives the equity value directly, with no EV→equity bridge. Rolling grid: year 0 is the TTM as of Aug 30, 2026 (revenue US$18.30bn: FY2026 US$18.42bn − 1Q FY26 US$4.52bn + 1Q FY27 US$4.39bn, built from levels from the Sep 23, 2026 release; the window still contains the 53rd week of FY2026 and Brazil's sales). TTM GAAP is a loss (operating profit −US$0.21bn; net income −US$0.90bn) from the FY2026 charges that remain inside the window —goodwill and brand impairments (North America Pet, Nudges, Uncle Toby's, True Chews, CPW) and the US$1.03bn valuation loss on the Brazil divestiture—, while the US$1.05bn gain from the sale of U.S. yogurt (1Q FY26) has already left the window. Year 0 is normalized excluding those charges, which do not move the value because the metric is adjusted earnings: TTM adjusted operating profit US$2.73bn (US$2,812M of FY2026 − US$711M of 1Q FY26 + US$634M of 1Q FY27; margin 14.9%) and TTM adjusted net income US$1.85bn (US$1,912M − US$469M + US$404M; margin 10.1%; adjusted earnings per share US$3.55 − US$0.86 + US$0.75 = US$3.44). FY2026 is taken from the reconciliation that includes noncontrolling interests and the two quarters from the one attributable to General Mills; the difference is not separated. The tax rate is the company's adjusted effective rate for FY2026 (21.1%; 23.4% in 1Q FY27). Year 1 starts from the guidance reaffirmed on Sep 23, 2026, with its two anchors: organic sales between −1.5% and +0.5% (the net effect of divestitures, foreign exchange and the 53rd week subtracts ~4% from reported sales), adjusted operating profit between −13% and −8% in constant currency from the US$2.8bn base, and adjusted earnings of US$3.00 to US$3.20 per share. Year 1 is the twelve-month window after Aug 30, 2026 and is built from levels: FY2027 at the midpoint (sales US$17.60bn; adjusted operating profit US$2.52bn; earnings per share US$3.10) less reported 1Q FY27, plus a 1Q FY28 equal to 1Q FY27 with −0.5% organic. The result is sales of US$17.57bn (−4.0% versus the TTM because of the lapping of the 53rd week, the exit from Brazil and the −0.5% organic, not because of an additional demand decline), an adjusted operating margin of 14.3% and an adjusted net margin of 9.4%. It is declared that 1Q FY28 does not deduct Brazil's sales (divestiture closed on Sep 2, 2026, sales not disclosed in the release), so year 1 may be overstated by a fraction of one quarter of those sales. The bear and bull scenarios anchor year 1 at the extremes of the same guidance (organic −1.5% / +0.5%; adjusted operating profit −13% / −8%; earnings per share US$3.00 / US$3.20). From year 2 the sales path keeps the prior trajectory (−0.2%, +0.2%, +0.5%, +0.8%): after the year-1 trough, which has a named cause, there is no reacceleration. Adjusted operating margin recovers gradually and modestly through productivity (at least US$750M of savings in FY2027), without projecting a reversion to the FY2023-25 level that the filings do not support. The exit multiple (12.5× base) is the center of a dedicated [11-14×] band for a structurally declining consumer staple —well below the 16-22× of a healthy consumer staple— because the decline is secular, not cyclical; bear 11× (the decline does not stop) / bull 14× (the decline is confirmed as stabilized). The share count is held at 537.9M in all three scenarios: over the last twelve months the dividend (US$1.31bn; US$2.44 per share) absorbed ~85% of free cash flow (US$1.55bn) and there were no buybacks since 1Q FY26 (US$500M; FY2024 had closed at US$2,002M), so a buyback that the revealed conduct does not show is not credited. The retained flow (~15%, ~US$0.23bn per year) accumulates as cash or debt repayment, equivalent in the bridge, and is credited only once.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (EV falls as cash increases). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $42 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $33, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $42 in 5 years plus $13 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $45. Against the current market price ($33), the margin of safety is 26.8% (trades below the maximum → there is margin) and the total return at that price would be 12.1% annually.

• Multiple vs. quality. Today's P/E 10× (on adjusted earnings) correctly reflects the decline — it is neither a hidden bargain nor an obvious value trap.
• Reverse-DCF. Today's price does not demand growth — consistent with a business in decline; the return depends mostly on the dividend.
• Margin of safety. The expected total return in the base case is modest and rests mostly on the dividend, not on multiple appreciation.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✕ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (102%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• ROIC vs. the 10% bar. On the balance sheet's real invested capital ($20,465M year-end, $22,095M fiscal-year average), adjusted after-tax operating income yields ~10.1%: right at the 10% bar, not comfortably above it. Incremental return cannot be measured this fiscal year — earnings and capital both contracted at the same time — and there is no identifiable growth capex to evaluate.
• Margin and stability. Adjusted operating margin fell ~190bp during the year, with no signs of stabilization yet.
• Cash quality. Real free cash flow is consistent with adjusted earnings and covers the dividend (~85% payout over the last twelve months), but in FY2026 it was not enough to cover the dividend plus the buyback combined.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The engine of a packaged-goods business is volume × price/mix. At General Mills, core-segment (North America Retail) organic volume has fallen for a third consecutive year (-4pts FY24, -2pts FY25, -1pt FY26) and the price lever has already inverted (from +3pts to -2pts) — the company is now cutting price and still losing volume, direct evidence that the brand moat is under pressure. Reported segment growth (International +8.8%, North America Pet +5.8%) is inflated by M&A/divestitures, not healthy organic demand. Dividend per share ($2.44 current) keeps growing but decelerating sharply (from +9.3% to +1.7% annually).

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-ago-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Real, not nominal. Reported growth is distorted by divestitures/M&A/the 53rd week; the core segment's organic figure shows negative volume for three straight years.
• Growth engine. Neither volume nor price: the price lever inverted to negative while volume keeps falling.
• Deceleration and cycle. This is not a transitory cycle: it is a secular decline with no clear signs of earnings stabilization.

• Relevant in 10 years (recurrence). Everyday branded consumption persists, but it is ceding ground to private label and value alternatives.
• Pricing power. The North America Retail price/mix lever inverted: from +3pts (FY24) to -2pts (FY26) — it is now cutting price and still losing volume.
• Moat and its direction. Wide on brand portfolio and scale, but clearly moving in an eroding direction (three years of negative volume).
• Capital cycle. Retail-channel consolidation plus private label gaining ground — capital is entering value competition, not exiting it.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $0 bn
• !Interest coverage (EBIT / interest)5.7x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 102% of ROIC
• ✕Value creation (ROIC − 10% bar)-0pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.9x — no over-investment
• –Float / working capitalNeutral WC
• ✓Dilution (SBC % of revenue + shares)SBC 0.5% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. Net debt ~$13.0bn (~4.7× adjusted operating income of $2.8bn) — elevated for a staple in decline.
• Coverage and cash. In FY2026 real free cash flow did not cover the dividend plus the buyback combined (payout ~112%); over the last twelve months, with no buybacks, the payout is ~85%.
• Dividend. It kept growing (10 consecutive increases), but decelerating sharply (from +9.3% to +1.7% annually) under cash pressure.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Skin in the game. No verified insider ownership data in this extraction (DEF 14A proxy not parsed).
• Capital allocation. In FY2026 the payout (dividend + buyback) exceeded the year's real FCF (~112%); the buyback was cut sharply (from $2,002M to $500M) and there were no purchases over the last twelve months, with the dividend protected.
• Integrity / normalization. The company itemizes the non-cash charges (impairments, the Brazil valuation loss, restructuring) in detail in the 10-K notes.

• Motivated selling driven by the accounting result: the company recognized $1.89bn of goodwill/brand impairments plus a $1.03bn valuation loss from the Brazil divestiture — the kind of non-cash charge that punishes GAAP without necessarily destroying intrinsic value.
• But there is also a genuine structural source of the discount, not just perception: core-segment organic volume has been falling for three years with the price lever exhausted, and adjusted earnings have fallen for two straight years ($4.52→$4.21→$3.55) with no clear signs of stabilization.
• FY27 guidance (organic sales -1.5%/+0.5%, adjusted operating income -8%/-13%) confirms the market is not overreacting: management itself guides to another year of contraction.

There are motivated-seller elements (the non-cash impairments), but they coexist with a genuine structural source (the volume decline in the core segment). It is not an obvious bargain: the low multiple (10× today) correctly reflects a business that has not yet stabilized its earnings. The investment case, if there is one, depends on the dividend (yield 7.5%) and on the decline moderating toward the midpoint of the band, not on a re-rating. The price trades far below its 52-week high; the search for a specific cause (as of the update date, Oct 10, 2026) found no primary source other than the results and the FY27 guidance: the decline is consistent with the contraction in adjusted earnings and the gap is declared.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +6%/year (+32% total): the margin of safety protects the downside. The bull (+18%/year, +125% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Core volume not stabilized. The central disconfirmer: if North America Retail organic volume does not bottom out, the entire base case is revised downward.
• Customer concentration (Walmart). 22% of consolidated sales, 31% of North America Retail — considerable bargaining power.
• Further goodwill/brand impairment. $1.89bn already recognized in FY2026; Blue Buffalo and Progresso show shrinking headroom in the impairment test.
• Indebtedness and payout against real FCF. The payout (dividend + buyback) exceeded 100% of real FCF in FY2026 — pressure on the sustainability of capital allocation.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: narrow moat, eroding.

• Peter Lynch Growth at a reasonable price (GARP)

  A slow grower, growing -2% — no conclusive PEG to judge the price.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 16% (EBIT/EV) + ROIC 10% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts -17% vs our -2%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -2%/yr, bull-scenario ceiling +11%/yr over 5y → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, eroding; sources: intangibles, efficient scale, cost advantage → fails the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -17%, within what we project (-2%) — the story squares with the numbers.