GIS Stock Report

2-Year Price History

Ockham's Rating

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GIS Revenue

As a value investing shop, we are interested in seeing how GIS's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 1.70x and the low end of the range at 1.32x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for GIS of 1.32x is somewhat below its historical weighted average by 13%. Given this level of sales per share, we suggest a neutral share price forecast. To the extent there is a further drop in the Price to Sales ratio from current levels, which would occur through some combination of increased sales per share or a decline in share price, we would only become more positive about the Price to Sales ratio outlook.

GIS Cash Earnings

Looking at GIS specifically in their Cash Earnings capabilities, Ockham views GIS as below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for GIS, the current level of Cash Earnings compared to its historical levels helps identify where GIS is in relation to what the investing community was willing to pay for this level of Cash Earnings in the past. With a historical high Cash Earnings per share ratio of 13.84 and a historical low Cash Earnings per share ratio of 10.71, an investor can relate where value becomes optimal.

With a historical average Cash Earnings ratio of 12.28, the current Cash Earnings ratio of 12.21 is a positive opportunity for value in the Ockham view. Naturally, we would love to see a deeper value opportunity for GIS, but to get there one of two things must occur (or both). Either the stock price must decline further to increase the long term buying opportunity, or the management at GIS needs to earn more cash. If either, or both, of these occur, then we could see a significant gap emerge between what investors were willing to pay for in the past, and where GIS is trading currently (latest close price of $58.50).

GIS Dividends

A positive Ockham rating does not require a company to pay out an inviting dividend or a dividend at all. However, we believe dividends provide a useful measure of a company's inherent expectations.

Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from GIS against the historic high and low levels over an available data range. Because GIS has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In GIS’s case, the estimated annual dividend is $1.88 producing a current dividend yield of 3.21%. The highest dividend yield from GIS in recent history was 4.05% while the lowest dividend yield was 2.08%. A current dividend yield of 4.73% above the historical median is favorable in our analysis of GIS.