Critical Review: General Mills (NYSE:GIS) versus Archer Daniels Midland (NYSE:ADM)

Archer Daniels Midland (NYSE:ADM) and General Mills (NYSE:GIS) are both large-cap consumer staples companies, but which is the superior business? We will contrast the two businesses based on the strength of their risk, institutional ownership, valuation, profitability, earnings, analyst recommendations and dividends.

Profitability

This table compares Archer Daniels Midland and General Mills’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Archer Daniels Midland	2.16%	9.21%	3.95%
General Mills	-4.89%	21.86%	5.85%

Valuation and Earnings

This table compares Archer Daniels Midland and General Mills”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Archer Daniels Midland	$80.27 billion	0.46	$1.08 billion	$3.65	21.18
General Mills	$18.30 billion	0.97	-$87.60 million	($1.66)	-19.90

Archer Daniels Midland has higher revenue and earnings than General Mills. General Mills is trading at a lower price-to-earnings ratio than Archer Daniels Midland, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Archer Daniels Midland has a beta of 0.64, meaning that its stock price is 36% less volatile than the S&P 500. Comparatively, General Mills has a beta of 0.03, meaning that its stock price is 97% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and price targets for Archer Daniels Midland and General Mills, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Archer Daniels Midland	2	7	2	0	2.00
General Mills	6	10	4	0	1.90

Archer Daniels Midland presently has a consensus target price of $81.75, suggesting a potential upside of 5.75%. General Mills has a consensus target price of $36.59, suggesting a potential upside of 10.73%. Given General Mills’ higher probable upside, analysts clearly believe General Mills is more favorable than Archer Daniels Midland.

Dividends

Archer Daniels Midland pays an annual dividend of $2.08 per share and has a dividend yield of 2.7%. General Mills pays an annual dividend of $2.44 per share and has a dividend yield of 7.4%. Archer Daniels Midland pays out 57.0% of its earnings in the form of a dividend. General Mills pays out -147.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Archer Daniels Midland has increased its dividend for 53 consecutive years and General Mills has increased its dividend for 5 consecutive years. General Mills is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

78.3% of Archer Daniels Midland shares are held by institutional investors. Comparatively, 75.7% of General Mills shares are held by institutional investors. 0.6% of Archer Daniels Midland shares are held by company insiders. Comparatively, 0.3% of General Mills shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Summary

Archer Daniels Midland beats General Mills on 10 of the 17 factors compared between the two stocks.

About Archer Daniels Midland

Archer-Daniels-Midland Company engages in the procurement, transportation, storage, processing, and merchandising of agricultural commodities, ingredients, flavors, and solutions in the United States, Switzerland, the Cayman Islands, Brazil, Mexico, Canada, the United Kingdom, and internationally. It operates in three segments: Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition. The company originates, merchandises, stores, and transports agricultural raw materials, such as oilseeds and soft seeds. It also engages in the agricultural commodity and feed product import, export, and distribution; and various structured trade finance activities. In addition, the company offers soybean meal and oil; vegetable and salad oils and protein meals; ingredients for the food, feed, energy, and industrial customers; margarine, shortening, and other food products; and partially refined oils to produce biodiesel and glycols for use in chemicals, paints, and other industrial products. Further, it provides peanuts, peanut-derived ingredients, and cotton cellulose pulp; sweeteners, corn and wheat starches, syrup, glucose, wheat flour, and dextrose; alcohol, and other food and animal feed ingredients; ethyl alcohol and ethanol; corn gluten feed and meal; distillers' grains; corn germ; and citric acids. Additionally, the company provides proteins, natural flavors, flavor systems, natural colors, emulsifiers, soluble fiber, polyols, hydrocolloids, probiotics, prebiotics, postbiotics, enzymes, and botanical extracts; and other specialty food and feed ingredients; edible beans; formula feeds, and animal health and nutrition products; and contract and private label pet treats and food products. It also offers futures commission merchant; commodity brokerage services; cash margins and securities pledged to commodity exchange clearinghouse; and cash pledged as security under certain insurance arrangements. The company was founded in 1902 and is headquartered in Chicago, Illinois.

About General Mills

General Mills, Inc. manufactures and markets branded consumer foods worldwide. The company operates through four segments: North America Retail; International; Pet; and North America Foodservice. It offers grain, ready-to-eat cereals, refrigerated yogurt, soup, meal kits, refrigerated and frozen dough products, dessert and baking mixes, bakery flour, frozen pizza and pizza snacks, snack bars, fruit and savory snacks, ice cream and frozen desserts, unbaked and fully baked frozen dough products, frozen hot snacks, ethnic meals, side dish mixes, frozen breakfast and entrees, nutrition bars, and frozen and shelf-stable vegetables. The company also manufactures and markets pet food products, including dog and cat food; and operates ice cream parlors. It markets its products under the Annie’s, Betty Crocker, Bisquick, Blue Buffalo, Bugles, Cascadian Farm, Cheerios, Chex, Cinnamon Toast Crunch, Cocoa Puffs, Cookie Crisp, Dunkaroos, Edgard & Cooper, Fiber One, Fruit by the Foot, Fruit Gushers, Fruit Roll-Ups, Gardetto’s, Gold Medal, Golden Grahams, Häagen-Dazs, Kitano, Kix, Lärabar, Latina, Lucky Charms, Muir Glen, Nature Valley, Nudges, Oatmeal Crisp, Old El Paso, Pillsbury, Progresso, Tastefuls, Total, Totino’s , Trix, True Chews, True Solutions, Wanchai Ferry, Wheaties, Wilderness, and Yoki brands. The company sells its products to grocery stores, mass merchandisers, membership stores, natural food chains, drug, dollar and discount chains, e-commerce retailers, commercial and noncommercial foodservice distributors and operators, restaurants, convenience stores, and pet specialty stores. General Mills, Inc. was founded in 1866 and is headquartered in Minneapolis, Minnesota.