(MONEY Magazine) – Cereal stocks have lost some of their crunch since last year. Kellogg plummeted 48% from its high and General Mills fell 31% from its peak before they both staged modest comebacks. These soggy returns suggest some values in the cereal aisle. Is either big brand a buy now?

Sales of traditional food items increase at a sluggish rate, so both Kellogg and General Mills have looked to acquisitions and global initiatives for growth. Despite these efforts, though, they remain primarily domestic cereal businesses. Tony the Tiger and friends account for 75% of Kellogg's $7 billion in annual sales. (Other sources include convenience foods such as Pop-Tarts.) But after years as the cereal king, Kellogg lost its throne last year to General Mills. Kellogg now commands 31% of the cereal market, down from 36% in 1995; over the same period, General Mills' share grew from 29% to 32%. Kellogg's profits have slumped too, falling an average of 6% annually over the past three years. One factor in Kellogg's decline: competition from generic brands. "Kellogg has been more susceptible to private-label imitation," says Art Cecil, a research analyst for the T. Rowe Price funds.

Kellogg's new CEO, Carlos Gutierrez, is trying to invigorate the company. He's done some major cost cutting, even closing part of the historic Battle Creek, Mich. plant. But more important, he's emphasizing brand development over the discounting favored by the previous regime. A new marketing campaign for Special K, for instance, features supermodel Cindy Crawford. "Price promotions just take down profits," says Gutierrez, "and you never get that sale back." Helped by this shift in strategy, earnings are expected to grow 9% this year.

General Mills, which owns high-profile brands Betty Crocker and Yoplait, is more diversified than its counterpart. Even so, domestic cereal brings in 35% of its $7.1 billion in sales. Big G, the cereal division, has capitalized on consumers' preference for healthier foods, adding calcium to kids' favorites like Lucky Charms. Cheerios has been certified by the American Heart Association for four years. General Mills also launched some successful brand extensions. Overall, sales have climbed 6% over the past two years.

Kellogg, with a price/earnings ratio of 16.1, may seem like a bargain. But lost momentum in Kellogg's core business makes it an iffy choice. General Mills, even with a P/E of 18.2, looks like a good deal. Earnings are expected to grow 10% this year. It still trades at a discount to the consumer-staples sector, which sports a P/E of 27.9. "General Mills has been underpriced for the performance it has been delivering," says T. Rowe Price's Cecil.

--ADRIENNE CARTER