Recently, I shared my analysis of 2 US companies in the fast moving consumer goods (or FMCG) business – General Mills (NYSE:GIS), as well as Kellogg Company (NYSE:K) – you can click on company names to read my review about them.
Just to recap the 2 companies business in one simple sentence for those who do not have the time to go through the entire post to know what they do – General Mills produces Haagan-Daz ice-cream while Kellogg Company produces Pringles potato chips – both are popular snacks among Singaporeans.
Following the posts, I have received messages from my blog readers asking me if they only had money to invest in just one (out of the 2), which one will it be?
The best way to answer this question is to put both companies’ historical performances side-by-side to compare (I’ll be comparing their performances between FY2014/15 and FY2021/22) – and that is what you will be reading about in today’s post. On top of that, I’ll also be putting the 2 companies’ current valuations (based on their current traded price) side-by-side to find out which is the ‘cheaper’ of the 2.
Total Revenue & Net Profit Growth:
Total revenue grew from $16,563m in FY2015/16 to $18,993m in FY2021/22, with year-on-year (y-o-y) improvements seen in 6 out of 7 years. In terms of its compound annual growth rate (CAGR) over a 7-year period, it is at 1.97%.
Net profit grew from $1,697m in FY2015/16 to $2,707m in FY2021/22, with y-o-y growth seen in 5 out of 7 years, and a CAGR of 6.9%.
Total revenue grew from $13,525m in FY2015/16 to $14,181m in FY2021/22, with y-o-y improvements recorded in 5 out of 7 years, and a CAGR of just 0.7%.
Net profit grew from $614m in FY2015/16 to $1,488m in FY2021/22, with y-o-y improvements seen in 6 out of 7 years, and a CAGR of 13.5%.
Verdict: It’s a tie here (in my opinion), as General Mills recorded a better growth in its total revenue (with y-o-y improvements seen in 6 out of 7 years, and a CAGR of 1.97%), while Kellogg Company recorded a better growth in its net profit (with y-o-y improvements seen in 6 out of 7 years, and a much superior CAGR growth at 13.5%.)
Gross & Net Profit Margin Growth:
Gross profit margin have hoovered at around the 30+% range.
Net profit margin, on the other hand, have seen a steady rise from 10.2% in FY2015/16 to 14.3% in FY2021/22.
Gross profit margin have also hoovered at around the 30+% range.
Net profit margin have improved from 4.5% in FY2015/16 to 10.5% in FY2021/22.
Verdict: While both companies have their gross profit margin at around the 30+% range throughout the 7 years I have looked at, and a steadily increasing net profit margin – but in my opinion, General Mills edged out here for its higher net profit margin over the years (at double-digit percentages throughout the entire 7-year period.)
Return on Equity (RoE) Growth:
General Mills: Its RoE have fluctuated between 20+% and 30+% over the last 7 years.
Kellogg Company: Its RoE have fluctuated between 20+% and 50+% over the last 7 years.
Verdict: While both companies’ RoE have fluctuated over the years, Kellogg Company edged out here for having a higher RoE compared to General Mills.
Net Cash/Debt Growth:
General Mills: It has been in a net debt position throughout the entire 7-year period I have looked at (however, it has seen improvements every single year since FY2017/18), with its current ratio moving at a range of between 0.6 and 0.8 in the same time period.
Kellogg Company: Just like General Mills, it is also in a net debt position throughout the entire 7-year period I have looked at (but it has improved every year since FY2018/19), with its current ratio moving at a range of between 0.6 and 0.7 in the same time period.
Verdict: Both companies’ debt positions are very similar – however, I must say that General Mills edged out slightly for having a better current ratio.
Free Cash Flow Per Share Growth:
General Mills: While its free cash flow per share have fluctuated throughout the entire 7-year period, but it has increased from $3.41 in FY2015/16 to $4.59 in FY2021/22 – and recording a CAGR of 4.3%.
Kellogg Company: The company’s free cash flow per share have also fluctuated over the entire 7-year period (and in one year recording a negative amount.) That said, however, its free cash flow per share have still manage to grow from $3.25 in FY2015/16 to $3.36 in FY2021/22 – a CAGR of 0.48%.
Verdict: Its very clear that General Mills is the winner here for having a much better CAGR in the growth of its free cash flow per share (at 4.3%, vs. 0.48% for Kellogg Company.)
Dividend Payout to Shareholders Growth
General Mills: The management declares a dividend payout to its shareholders on a quarterly basis, with the amount increasing every single year from $1.78/share in FY2015/16 to $2.04/share in FY2021/22 – a CAGR of 2.0%.
Kellogg Company: The management declares a dividend payout to its shareholders on a quarterly basis, with the amount increasing every single year from $2.04/share in FY2015/16 to $2.31/share in FY2021/22 – a CAGR of 2.2%.
Verdict: As far as growth in dividend payout to shareholders is concerned, Kellogg Company edged out here with its dividend payout growing by 2.2% over the last 7 financial years (compared to 2.0% for General Mills.)
Which Company is ‘Cheaper’ Currently?
The following table are both companies’ current traded price and valuation (as at market close on 12 September 2022):
|General Mills||Kellogg Company|
|Current Share Price||$76.15||$72.64|
Verdict: Looking at the current valuations above, it seems like Kellogg Company is the ‘cheaper’ of the 2 companies – with its P/E ratio lower than that of General Mills’, along with its dividend yield higher.
I would say it was a very close ‘fight’ between these 2 FMCG companies – with both companies ‘neck to neck’ in terms of their historical financial performance growth, debt profile, along with dividend payout growth.
In terms of which company is the ‘cheaper’ one, I would say its also very close – but Kellogg Company is currently the ‘cheaper’ one based on its valuations (compared to General Mills’.)
That said, this post is by no means any recommendation to buy or sell shares of any companies. All the information presented is purely for educational purposes only. You’re strongly advised to do your own due diligence prior to making any investment decisions.
Disclaimer: At the time of writing, I am not a shareholder of General Mills or Kellogg Company.
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