Lamb Weston (NYSE:LW) and General Mills (NYSE:GIS) Critical Review

Lamb Weston (NYSE:LW) and General Mills (NYSE:GIS) are both consumer staples companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, risk, earnings, valuation, profitability, analyst recommendations and dividends.

Dividends

Lamb Weston pays an annual dividend of $1.52 per share and has a dividend yield of 3.3%. General Mills pays an annual dividend of $2.44 per share and has a dividend yield of 5.6%. Lamb Weston pays out 54.7% of its earnings in the form of a dividend. General Mills pays out 52.5% 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. Lamb Weston has increased its dividend for 7 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.

Profitability

This table compares Lamb Weston and General Mills’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Lamb Weston	6.06%	27.71%	6.52%
General Mills	13.51%	21.41%	6.12%

Insider and Institutional Ownership

89.6% of Lamb Weston shares are owned by institutional investors. Comparatively, 75.7% of General Mills shares are owned by institutional investors. 0.3% of Lamb Weston shares are owned by insiders. Comparatively, 0.3% of General Mills shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares Lamb Weston and General Mills”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Lamb Weston	$6.45 billion	0.99	$357.20 million	$2.78	16.46
General Mills	$19.49 billion	1.19	$2.30 billion	$4.65	9.34

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

Volatility and Risk

Lamb Weston has a beta of 0.43, suggesting that its stock price is 57% less volatile than the S&P 500. Comparatively, General Mills has a beta of -0.05, suggesting that its stock price is 105% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and target prices for Lamb Weston and General Mills, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Lamb Weston	0	10	3	0	2.23
General Mills	4	13	4	0	2.00

Lamb Weston presently has a consensus price target of $53.00, indicating a potential upside of 15.82%. General Mills has a consensus price target of $50.42, indicating a potential upside of 16.10%. Given General Mills’ higher possible upside, analysts plainly believe General Mills is more favorable than Lamb Weston.

Summary

General Mills beats Lamb Weston on 10 of the 17 factors compared between the two stocks.

About Lamb Weston

Lamb Weston Holdings, Inc. produces, distributes, and markets frozen potato products worldwide. The company operates through four segments: Global, Foodservice, Retail, and Other. It offers frozen potatoes, commercial ingredients, and appetizers under the Lamb Weston brand, as well as under various customer labels. The company also provides its products under its owned or licensed brands, such as Grown in Idaho and Alexia, and other licensed brands, as well as under retailers' own brands. In addition, it engages in the vegetable and dairy businesses. The company sells its products through a network of internal sales personnel and independent brokers, agents, and distributors to chain restaurants, wholesale, grocery, mass merchants, club and specialty retailers, businesses, educational institutions, independent restaurants, regional chain restaurants, and convenience stores. Lamb Weston Holdings, Inc. was incorporated in 1950 and is headquartered in Eagle, Idaho.

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.