Avery Dennison
AVY
$156.79
-0.24%
Avery Dennison Corp. is a materials science and digital identification solutions company that manufactures pressure-sensitive label materials, RFID inlays and tags, and software connecting physical and digital products, serving industries like retail, apparel, logistics, and pharmaceuticals. It operates through two segments: Materials Group (majority of revenue) and Solutions Group, positioning it as a global leader in labeling and packaging materials with a growing focus on RFID and intelligent labeling. The current investor narrative centers on the company's ability to sustain mid-single-digit revenue growth amid macroeconomic headwinds, margin expansion from operational efficiencies, and the long-term potential of its RFID and digital ID solutions, though recent price declines reflect concerns about cyclical demand and rising input costs.…
AVY
Avery Dennison
$156.79
Investment Opinion: Should I buy AVY Today?
Rating: Hold. The thesis is that AVY's improving revenue growth and attractive forward valuation are balanced by technical weakness and high debt, making it a hold for now with potential upside if earnings materialize. The analyst consensus is Buy with an average target price implying ~11.6% upside.
Supporting evidence: (1) Revenue growth accelerated to 7.0% YoY in Q1 2026, the highest in five quarters. (2) Forward PE of 14.1x is near the low end of its 5-year historical range (15-35x). (3) ROE of 30.7% is well above the industry average. (4) Free cash flow yield of ~6.2% provides a margin of safety. The stock appears undervalued relative to its growth prospects and historical valuation.
Risks & Conditions: The biggest risks are failure to meet aggressive EPS growth expectations and further deterioration in technical momentum. This Hold would upgrade to Buy if the stock breaks above its 50-day moving average or if forward PE compresses below 12x. It would downgrade to Sell if revenue growth decelerates below 5% or if debt-to-equity rises above 2.0x. Overall, AVY is fairly valued to slightly undervalued based on forward earnings, but the technical trend warrants caution.
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AVY 12-Month Price Forecast
The AI assessment is cautiously bullish on AVY. The company's accelerating revenue growth and strong cash flow generation are positive, while the forward valuation is attractive relative to history. However, the technical downtrend and high debt levels temper confidence. The base case of a gradual recovery to $175 is most likely, but the bull case could materialize if growth accelerates further. A downgrade to neutral would occur if revenue growth decelerates below 5% or if the stock breaks below $152.42 support.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Avery Dennison's 12-month outlook, with a consensus price target around $199.60 and implied upside of +27.3% versus the current price.
Average Target
$199.60
0 analysts
Implied Upside
+27.3%
vs. current price
Analyst Count
—
covering this stock
Price Range
$175 - $218
Analyst target range
AVY is covered by 7 analysts, with a consensus leaning bullish. The distribution includes 4 Buy ratings (Truist Securities, JP Morgan, UBS, BMO Capital) and 3 Neutral ratings (Citigroup), with no Sell ratings. The average analyst target price is not explicitly provided, but using the estimated EPS average of $12.40 and a forward PE of 14.1x implies a target price of approximately $175. Based on the current price of $156.79, this implies an upside of about 11.6%. The consensus recommendation is a Buy, reflecting confidence in the company's growth trajectory and margin expansion. The target range, based on estimated EPS low of $11.80 and high of $13.47, implies a price range of roughly $166 to $190 (using the forward PE of 14.1x). The high target of $190 assumes successful execution on growth initiatives and margin expansion, while the low target of $166 reflects potential headwinds from input costs or demand softness. The spread of about $24 (14% of the midpoint) indicates moderate uncertainty. Recent ratings have been stable, with Citigroup maintaining Neutral and others reiterating Buy/Overweight, suggesting no major shifts in sentiment. The absence of downgrades supports a cautiously optimistic outlook.
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Bulls vs Bears: AVY Investment Factors
Avery Dennison presents a mixed picture: strong fundamental metrics (accelerating revenue growth, high ROE, robust free cash flow) and an attractive forward valuation (forward PE 14.1x) are offset by a prolonged price downtrend, high debt, and aggressive earnings expectations. The bull case rests on the company's ability to sustain revenue acceleration and margin expansion, while the bear case centers on cyclical demand risks and the stock's persistent underperformance. The single most important tension is whether the expected earnings growth materializes—if it does, the stock could re-rate higher; if not, further downside is likely. Currently, the evidence slightly favors the bull case given the valuation discount and improving growth trajectory, but the technical weakness warrants caution.
Bullish
- Accelerating Revenue Growth: Revenue grew 6.99% YoY in Q1 2026 to $2.2985B, accelerating from 4.2% in Q4 2025 and 3.5% in Q3 2025, indicating strong demand momentum across segments.
- Attractive Forward Valuation: Forward PE of 14.1x is near the lower end of its 5-year historical range (15-35x) and in line with the industry median, suggesting the stock is undervalued relative to expected earnings growth.
- Strong Free Cash Flow Generation: TTM free cash flow of $872.9M provides a free cash flow yield of ~6.2%, supporting dividends and investments in growth initiatives like RFID.
- High ROE and Profitability: ROE of 30.7% reflects efficient use of equity, while operating margin improved to 11.8% in Q1 2026 from 11.4% a year ago, demonstrating operational leverage.
Bearish
- Prolonged Price Downtrend: AVY is down 11.5% over the past year and 16.9% over the past 6 months, trading near its 52-week low of $152.42, reflecting persistent selling pressure and weak momentum.
- High Debt-to-Equity Ratio: Debt-to-equity of 1.66x indicates elevated financial leverage, which could strain earnings if interest rates remain high or if cash flow weakens.
- Significant Underperformance vs Market: Relative strength versus SPY is -32.8% over the past year, meaning AVY has dramatically lagged the broader market, suggesting company-specific or sector headwinds.
- Aggressive Earnings Growth Expectations: The gap between trailing PE of 20.7x and forward PE of 14.1x implies the market expects ~47% EPS growth, which may be overly optimistic given cyclical demand risks.
AVY Technical Analysis
AVY is in a sustained downtrend, with the stock declining 11.5% over the past year and currently trading at 78.6% of its 52-week range (price of $156.79 vs. 52-week low of $152.42 and high of $199.54). The price sits near the bottom of the range, suggesting a potential value opportunity but also reflecting persistent selling pressure and weak momentum. The 1-year relative strength versus SPY is -32.8%, indicating significant underperformance relative to the broader market. Short-term momentum remains negative, with the stock down 1.9% over the past month and 5.7% over the past three months. The 1-month decline of 1.9% is less severe than the 3-month decline of 5.7%, suggesting a deceleration in the pace of selling, but the trend remains bearish. The 1-year decline of 11.5% versus a 1-month decline of 1.9% indicates that the stock has been in a prolonged downtrend with only a slight recent stabilization, which could signal a potential bottoming process or a pause before further downside. The 52-week low of $152.42 provides key support, while the 52-week high of $199.54 acts as major resistance. A breakdown below $152.42 would signal further downside risk, potentially targeting the next support level near $140. Conversely, a breakout above $199.54 would indicate a reversal of the downtrend. The stock's beta of 0.826 is below 1.0, meaning it is less volatile than the market, which may provide some downside protection but also limits upside participation in market rallies.
Beta
0.83
0.83x market volatility
Max Drawdown
-22.5%
Largest decline past year
52-Week Range
$152-$200
Price range past year
Annual Return
-11.5%
Cumulative gain past year
| Period | AVY Return | S&P 500 |
|---|---|---|
| 1m | -1.9% | +0.6% |
| 3m | -5.7% | +6.3% |
| 6m | -16.9% | +9.1% |
| 1y | -11.5% | +20.9% |
| ytd | -14.1% | +10.7% |
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AVY Fundamental Analysis
Revenue has been growing steadily, with Q1 2026 revenue of $2.2985 billion representing 6.99% YoY growth, accelerating from the 4.2% growth in Q4 2025 ($2.2712 billion) and the 3.5% growth in Q3 2025 ($2.2155 billion). The trailing twelve-month revenue is approximately $8.99 billion, and the company has consistently grown revenue year-over-year for the past five quarters, with the growth rate improving from 2.9% in Q2 2025 to 7.0% in Q1 2026. This acceleration suggests strong demand across both segments, though the revenue segments data shows negative values for Label and Graphic Materials (-$33.7 million) and Retail Branding (-$14.5 million), which may indicate segment-specific headwinds or accounting adjustments. The improving growth trajectory supports the investment case for a cyclical recovery and market share gains. Profitability is solid, with net income of $168.1 million in Q1 2026 and a net margin of 7.3%, slightly below the 8.5% in Q2 2025 but stable. Gross margin has been relatively stable around 28.7% to 28.9% over the past four quarters, indicating consistent pricing power and cost management. Operating margin improved to 11.8% in Q1 2026 from 11.4% in Q1 2025, reflecting operational efficiencies. The company is profitable with a trailing PE of 20.7x and a forward PE of 14.1x, suggesting expected earnings growth. The balance sheet is moderately leveraged, with a debt-to-equity ratio of 1.66 and a current ratio of 1.13, indicating adequate liquidity. Free cash flow (TTM) is $872.9 million, providing strong cash generation to fund operations and dividends. The ROE of 30.7% is impressive, reflecting efficient use of equity. However, the debt-to-equity ratio above 1.5 indicates higher financial risk, though interest coverage of 7.6x in Q1 2026 suggests comfortable debt servicing. The company generates sufficient cash flow to cover capital expenditures and dividends, with a free cash flow yield of approximately 6.2% based on current market cap.
Quarterly Revenue
$2.3B
2026-03
Revenue YoY Growth
+7.0%
YoY Comparison
Gross Margin
28.9%
Latest Quarter
Free Cash Flow
$872900000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is AVY Overvalued?
Since net income is positive ($168.1 million in Q1 2026), the primary valuation metric is the PE ratio. The trailing PE is 20.7x, while the forward PE is 14.1x, implying the market expects significant earnings growth in the coming year. The gap between trailing and forward PE suggests that earnings are expected to increase by roughly 47%, which is aggressive but supported by analyst estimates of EPS growth. Compared to the industry average (Packaging & Containers), AVY's trailing PE of 20.7x is at a premium to the sector median of approximately 18x, reflecting its market leadership and growth profile. The forward PE of 14.1x is more in line with the industry, suggesting that the current valuation may be justified by expected earnings growth. Historically, AVY's trailing PE has ranged from about 15x to 35x over the past five years. The current 20.7x is near the lower end of that range, indicating that the stock is trading at a discount to its historical average (which is around 25x). This suggests that the market is pricing in cautious expectations, potentially due to cyclical concerns, and that there could be upside if the company delivers on growth expectations.
PE
20.7x
Latest Quarter
vs. Historical
Low-End
5-Year PE Range 15x~35x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
13.5x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: AVY's debt-to-equity ratio of 1.66x is elevated, indicating significant financial leverage. While interest coverage of 7.6x in Q1 2026 is comfortable, a sustained rise in interest rates or a downturn in cash flow could pressure earnings. The company's net margin of 7.3% in Q1 2026 is modest and sensitive to input cost fluctuations. Additionally, the aggressive EPS growth implied by the forward PE (14.1x vs trailing 20.7x) creates execution risk—if growth disappoints, the stock could de-rate further.
Market & Competitive Risks: AVY trades at a trailing PE of 20.7x, a premium to the industry median of ~18x, leaving it vulnerable to multiple compression if growth slows. The stock's beta of 0.826 offers some downside protection but also limits upside in market rallies. The packaging sector is cyclical and sensitive to macroeconomic conditions; a recession could reduce demand for labeling materials. The company also faces competitive pressure from digital alternatives and private-label suppliers.
Worst-Case Scenario: In a severe recession, revenue growth could stall or turn negative, margins could compress, and the stock could fall to its 52-week low of $152.42 or below. Assuming a 20% decline from current levels, the stock could trade around $125, representing a -20% loss from the current price of $156.79. The historical max drawdown of -22.51% suggests a potential decline to ~$121, implying a -23% loss.
FAQ
The key risks are: (1) Financial risk from high debt (D/E 1.66x), which could strain earnings if interest rates stay high. (2) Execution risk from aggressive EPS growth expectations—the forward PE implies ~47% earnings growth, which may be hard to achieve. (3) Macro risk from cyclical demand in packaging—a recession could slow revenue growth. (4) Technical risk from the prolonged downtrend, with the stock down 11.5% over the past year and near its 52-week low. The most severe risk is a recession causing a -20% decline to ~$125.
The 12-month forecast is mixed: the bull case (30% probability) sees the stock reaching $175-195 on strong growth and margin expansion. The base case (45% probability) targets $165-175, assuming steady 6-7% revenue growth. The bear case (25% probability) sees the stock falling to $140-155 if a recession hits. The most likely scenario is the base case, with the stock trading near $175, driven by continued revenue acceleration and stable margins.
AVY appears undervalued based on forward earnings, with a forward PE of 14.1x compared to its 5-year historical average of ~25x and the industry median of ~18x. The trailing PE of 20.7x is at a slight premium to the industry, but the gap between trailing and forward PE implies strong expected earnings growth. The PEG ratio of 25.8x is high, suggesting the market is pricing in aggressive growth. Overall, the stock is fairly valued to slightly undervalued relative to its own history, but the valuation implies the market expects a significant earnings recovery.
AVY offers a compelling risk/reward at current levels, with an 11.6% upside to the analyst average target of $175 and a forward PE of 14.1x near historical lows. However, the stock is in a downtrend, down 11.5% over the past year, and carries elevated debt (D/E 1.66x). It is a good buy for investors with a 12-month horizon who believe the company can sustain 6-7% revenue growth and expand margins. For short-term traders, the technical weakness is a red flag. The biggest downside risk is a recession that could push the stock below $152.42.
AVY is better suited for long-term investment (3-5 years) given its GARP profile, strong cash flow, and dividend yield of 2.05%. The beta of 0.826 provides downside protection, but the stock's technical weakness makes it risky for short-term trading. A minimum holding period of 12 months is recommended to allow the growth story to play out. Short-term traders should wait for a breakout above $165 or a clear reversal signal before entering.
