In this violent market, defense has become the new offense, and investors have rushed into defensive consumer staples names like McDonald’s (NYSE:MCD), Coca-Cola (NYSE:KO), Proctor & Gamble (NYSE:PG) and PepsiCo (NYSE:KO). All three of those stocks are right near all-time highs, while the market is trading 15% off its all-time highs. But, one defensive stock that investors aren’t rushing into is General Mills (NYSE:GIS). Despite increased market volatility, investors have continued to shun the packaged food giant. As of this writing, GIS stock trades at essentially its lowest levels since mid-2011, and has fallen a whopping 50% over the past two and a half years.

To be sure, the weakness in GIS stock is warranted. The company has been losing the battle on the consumer front for several years now. There has been a secular shift away from mainstream consumer goods and towards niche, organic, healthy consumer goods. General Mills has been slow to pivot. Sales have dropped. So have profits. And GIS stock.

But, not all is lost. General Mills is adapting its product line to be more relevant to today’s more health conscious consumer. Early results are promising. If the company can sustain this turnaround momentum, then today’s exceptionally depressed valuation implies big rebound potential for GIS stock.

All in all, GIS stock looks good here and now. Fundamentals are starting to turn around, and the stock is way too cheap for it’s own good.

The Fundamentals Imply a Brighter Tomorrow

The core of the decline in GIS stock over the past several years is that a hugely levered balance sheet is converging on persistently disappointing operating results at a time when rates are rising. That’s an ugly combo that results in investors selling first, and asking questions later. Net result? GIS stock dropping 50% over the past 36 months.

But, if results stabilize, investors will ignore that leverage problem since most consumer staples giants have a lot of leverage — the thought being that leverage is supported by stable demand. Stable demand has been called into question recently at General Mills. If those question marks disappear, then GIS stock should turn around in a big way.

The bullish observation here is that there are signs that an operational turnaround is already underway. General Mills has adapted its product portfolio to be more relevant to toady’s health-conscious consumer, and sales trends have consequently started to turn a corner.

General Mills cereal sales in the U.S. were down 3.5% in the second half of 2017. But, the growth trend has improved ever since, and the company exited November with a flat cereal growth rate in the U.S. The same thing has happened on the yogurt front. Back in 2017, General Mills market share in the U.S. market slipped by nearly 4 points. Through the first half of fiscal 2019, the yogurt business has gained 0.3 points of U.S. market share.

Also, the company has launched a flurry of new health-conscious product lines over the past few years which have reinvigorated growth. Two of the more noteworthy brands include EPIC and Cascadian Farms. Plus, the company just acquired the rapidly growing pet food business Blue Buffalo, which has captured nearly 10% of the pet food market and posted first half 2019 sales growth of 19%.

Overall, the fundamentals supporting GIS stock actually aren’t all that bad. They were bad over the past 5 years. Now, they’re better. If they stay better for longer, GIS stock will rally in a big way from here.

The Valuation Is Anemic

Across the board, GIS stock is just way too cheap to ignore.

The stock trades at 13 forward earnings. That is well below its five year average forward multiple of 18, and also below the market average forward multiple of 14. The price-to-sales multiple is 1.2, also well below the five year average forward multiple of 2. The EV/EBITDA multiple is also notably below its five year average.

Meanwhile, GIS stock has a dividend yield of 5%. That is 170 basis points above the stock’s five year average yield of 3.3%. It is also more than double the S&P 500’s dividend yield of 2.1%.

Overall, GIS stock is just really, really cheap. Indeed, it is too cheap. The only way GIS stock stays this depressed is if top- and bottom-line operating results remain negative for the foreseeable future. But, there are already signs that things are starting to turnaround. If this operational turnaround persists, it is only a matter of time before it spills into the stock.

Bottom Line on GIS Stock

GIS stock isn’t the type of secular growth stock you want to buy and hold forever. But, it is a consumer staples name that is here to stay for the long run, and you want to buy those types of companies when the valuation becomes unreasonably depressed.

That is where we are today. As such, biting into GIS stock at multi-year lows seems like the smart move.

As of this writing, Luke Lango was long GIS.