Trade-Ideas: General Mills (GIS) Is Today's

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified General Mills ( GIS) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified General Mills as such a stock due to the following factors:

  • GIS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $118.0 million.
  • GIS has traded 1.9 million shares today.
  • GIS traded in a range 237.6% of the normal price range with a price range of $1.04.
  • GIS traded below its daily resistance level (quality: 40 days, meaning that the stock is crossing a resistance level set by the last 40 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on GIS:

General Mills, Inc. manufactures and markets branded consumer foods in the United States and internationally. It also supplies branded and unbranded food products to the foodservice and commercial baking industries. The company operates in three segments: U.S. The stock currently has a dividend yield of 3.1%. GIS has a PE ratio of 18.8. Currently there are 5 analysts that rate General Mills a buy, 2 analysts rate it a sell, and 5 rate it a hold.

The average volume for General Mills has been 2.7 million shares per day over the past 30 days. General Mills has a market cap of $32.4 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.30 and a short float of 2.4% with 6.64 days to cover. Shares are up 6.5% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates General Mills as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, notable return on equity, expanding profit margins, good cash flow from operations and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:

  • GENERAL MILLS INC has improved earnings per share by 18.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, GENERAL MILLS INC increased its bottom line by earning $2.83 versus $2.79 in the prior year. This year, the market expects an improvement in earnings ($3.00 versus $2.83).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Food Products industry and the overall market, GENERAL MILLS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • 38.48% is the gross profit margin for GENERAL MILLS INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 9.44% is above that of the industry average.
  • Net operating cash flow has slightly increased to $816.80 million or 4.67% when compared to the same quarter last year. In addition, GENERAL MILLS INC has also modestly surpassed the industry average cash flow growth rate of 2.83%.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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