U.S. markets open in 7 hours 31 minutes
  • S&P Futures

    3,945.75
    +0.75 (+0.02%)
     
  • Dow Futures

    33,643.00
    +10.00 (+0.03%)
     
  • Nasdaq Futures

    11,566.50
    +0.50 (+0.00%)
     
  • Russell 2000 Futures

    1,813.70
    -0.40 (-0.02%)
     
  • Crude Oil

    74.43
    +0.18 (+0.24%)
     
  • Gold

    1,784.00
    +1.60 (+0.09%)
     
  • Silver

    22.44
    +0.11 (+0.49%)
     
  • EUR/USD

    1.0453
    -0.0016 (-0.16%)
     
  • 10-Yr Bond

    3.5130
    0.0000 (0.00%)
     
  • Vix

    22.17
    +1.42 (+6.84%)
     
  • GBP/USD

    1.2116
    -0.0017 (-0.14%)
     
  • USD/JPY

    137.6340
    +0.6740 (+0.49%)
     
  • BTC-USD

    16,953.31
    -59.34 (-0.35%)
     
  • CMC Crypto 200

    399.53
    -2.27 (-0.56%)
     
  • FTSE 100

    7,521.39
    -46.15 (-0.61%)
     
  • Nikkei 225

    27,686.40
    -199.47 (-0.72%)
     

Should You Think About Buying Avery Dennison Corporation (NYSE:AVY) Now?

Avery Dennison Corporation (NYSE:AVY) saw a decent share price growth in the teens level on the NYSE over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Avery Dennison’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Avery Dennison

What's The Opportunity In Avery Dennison?

Avery Dennison appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 18.5x is currently well-above the industry average of 13.28x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like Avery Dennison’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Avery Dennison?

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Avery Dennison's earnings over the next few years are expected to increase by 31%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in AVY’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe AVY should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on AVY for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for AVY, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Avery Dennison.

If you are no longer interested in Avery Dennison, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here