Over the last six months, Avery Dennison’s shares have sunk to $183.78, producing a disappointing 6.9% loss - a stark contrast to the S&P 500’s 10.9% gain. This may have investors wondering how to approach the situation.
Is there a buying opportunity in Avery Dennison, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Avery Dennison Not Exciting?
Even though the stock has become cheaper, we’re sitting this one out for now. Here are three reasons why AVY doesn’t excite us, plus one stock we’d rather own.
1. Slow Organic Growth Suggests Waning Demand In Core Business
In addition to reported revenue, organic revenue is a useful data point for analyzing Industrial Packaging companies. This metric gives visibility into Avery Dennison’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Avery Dennison’s organic revenue averaged 2.1% year-on-year growth. This performance was underwhelming and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations. 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Avery Dennison’s revenue to rise by 2.4%, close to its 3.3% annualized growth for the past five years. This projection is underwhelming and implies its newer products and services will not accelerate its top-line performance yet.
3. EPS Barely Growing
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Avery Dennison’s weak 2.9% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
Final Judgment
Avery Dennison’s business quality ultimately falls short of our standards. After the recent drawdown, the stock trades at 17.5× forward P/E (or $183.78 per share). This valuation multiple is fair, but we don’t have much faith in the company. We’re fairly confident there are better investments elsewhere. Let us point you toward a top digital advertising platform riding the creator economy.
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