Avery Dennison
AVY
$182.68
-0.26%
Avery Dennison Corp. is a global materials science and digital identification solutions company, providing labeling and functional materials, RFID inlays and tags, and software that connects physical and digital products across industries such as retail, apparel, logistics, and pharmaceuticals. The company operates through two segments: Materials Group, which manufactures pressure-sensitive label materials and adhesive solutions, and Solutions Group, which offers RFID-enabled tags and brand management services. As a market leader in pressure-sensitive adhesives and a pioneer in RFID technology, Avery Dennison is positioned at the intersection of traditional packaging and digital transformation. The current investor narrative centers on the company's ability to accelerate growth through its intelligent labeling and RFID solutions, while navigating cyclical demand in its core materials business and managing margin pressures from raw material costs.…
AVY
Avery Dennison
$182.68
Investment Opinion: Should I buy AVY Today?
Rating: Buy. Avery Dennison is a quality compounder with accelerating revenue growth, high ROE, and a reasonable valuation relative to peers, but the high PEG ratio and leverage warrant caution. The consensus analyst rating is Buy with an average target of $201.80, implying 12.8% upside, which supports a positive outlook.
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AVY 12-Month Price Forecast
The AI assessment is bullish with medium confidence. Avery Dennison's strong profitability, accelerating revenue growth, and reasonable valuation relative to peers support a positive outlook. The key risk is the high PEG ratio, which suggests the market may be overpaying for growth. However, the forward P/E of 15.93x is attractive if the company can deliver on its earnings growth potential. I would upgrade to high confidence if revenue growth exceeds 8% in the next quarter, and downgrade to neutral if growth decelerates below 5% or margins deteriorate.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Avery Dennison's 12-month outlook, with a consensus price target around $201.80 and implied upside of +10.5% versus the current price.
Average Target
$201.80
0 analysts
Implied Upside
+10.5%
vs. current price
Analyst Count
—
covering this stock
Price Range
$181 - $225
Analyst target range
Analyst coverage is moderate, with 10 analysts covering Avery Dennison, and the consensus recommendation is a 'Buy' with a mean rating of 1.55 (where 1 is Strong Buy and 5 is Sell). The average target price is $201.80, implying an upside of approximately 12.8% from the current price of $178.93. The distribution includes 7 Buy/Overweight ratings, 2 Neutral ratings, and 1 Sell rating, indicating a generally bullish sentiment. The target price range spans from $181.00 (low) to $225.00 (high), with the low target implying only 1.2% upside, while the high target suggests a 25.7% upside. The wide spread of $44 between low and high targets reflects moderate uncertainty, likely due to cyclicality in the materials business and the pace of RFID adoption. Recent institutional ratings show a mix of actions, with Citigroup maintaining a Neutral stance, while Truist, JP Morgan, UBS, and BMO have reiterated Buy/Overweight ratings, indicating that the bullish sentiment is supported by recent reaffirmations.
Bulls vs Bears: AVY Investment Factors
Avery Dennison presents a mixed picture: strong revenue growth, high ROE, and a reasonable P/E relative to peers support a bullish case, while an extremely high PEG ratio, elevated leverage, and significant underperformance versus the market warrant caution. The bull case is currently stronger, driven by accelerating growth in RFID and intelligent labeling, which is not fully reflected in the forward P/E. However, the single most important tension is whether the company can deliver the ~30% earnings growth implied by the forward P/E, given margin pressures and cyclicality. If growth materializes, the stock is undervalued; if not, the high PEG and leverage could lead to multiple compression and downside.
Bullish
- Strong Revenue Growth Acceleration: Q1 2026 revenue grew 6.99% YoY to $2.30B, up from 4.9% growth in Q1 2025, indicating accelerating demand across both segments. This marks the third consecutive quarter of sequential revenue increases, from $2.22B in Q2 2025 to $2.30B in Q1 2026.
- High ROE and Profitability: ROE stands at 30.69%, significantly above the industry average of 18%, reflecting efficient capital deployment and strong shareholder value creation. Net margin of 7.31% in Q1 2026 remains stable, supported by a gross margin of 28.92% that improved from 28.65% in Q4 2025.
- Attractive Valuation vs. Peers: Trailing P/E of 20.67x is below the industry average of 22.0x, despite superior profitability metrics. The forward P/E of 15.93x implies expected earnings growth of ~29.7%, which is not yet fully priced in, offering upside if growth materializes.
- Analyst Consensus Buy with Upside: With a mean rating of 1.55 (Buy) and an average target price of $201.80, the stock offers 12.8% upside from the current price of $178.93. Seven of ten analysts rate it Buy/Overweight, with recent reaffirmations from Truist, JP Morgan, UBS, and BMO.
Bearish
- Elevated PEG Ratio Signals Overpricing: The PEG ratio of 25.78x is extremely high, suggesting the market's growth expectations are overly optimistic relative to current earnings growth. This implies the stock could be vulnerable to multiple compression if growth disappoints.
- High Debt-to-Equity Ratio: Debt-to-equity of 1.66x indicates significant leverage, which increases financial risk, especially if interest rates remain elevated. Interest expense of $35.6M in Q1 2026 consumes a notable portion of operating income.
- Underperformance vs. Market: The stock has underperformed the S&P 500 significantly over the past year: -19.7% relative strength (1-year) and -22.5% over 6 months. This suggests persistent negative sentiment and potential headwinds that could continue.
- Margin Pressure in Core Business: Operating margin declined to 11.83% in Q1 2026 from 12.39% in Q4 2025, indicating cost pressures or mix shifts. Gross margin, while improved, remains below the 29.6% seen in Q2 2024, suggesting structural challenges.
AVY Technical Analysis
Avery Dennison's stock has been in a broad recovery phase over the past year, with a 1-year price change of +0.66%, essentially flat, but the stock has rebounded strongly from its 52-week low of $152.42. Currently trading at $178.93, the stock sits at approximately 89.7% of its 52-week range (calculated as (178.93-152.42)/(199.54-152.42)), indicating it is closer to the highs but still below the peak. This positioning suggests a constructive recovery, though the stock has yet to reclaim its previous highs, implying lingering overhead supply. The 6-month price change of -8.62% highlights a significant pullback from earlier levels, but the recent momentum suggests a potential trend reversal.
Beta
0.81
0.81x market volatility
Max Drawdown
-22.5%
Largest decline past year
52-Week Range
$152-$200
Price range past year
Annual Return
+4.0%
Cumulative gain past year
| Period | AVY Return | S&P 500 |
|---|---|---|
| 1m | +17.3% | +1.9% |
| 3m | +14.4% | +2.3% |
| 6m | -7.2% | +10.6% |
| 1y | +4.0% | +19.5% |
| ytd | +0.1% | +11.8% |
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AVY Fundamental Analysis
Avery Dennison's revenue trajectory shows steady growth, with the most recent quarter (Q1 2026) reporting revenue of $2.2985 billion, up 6.99% year-over-year. This growth is consistent with the prior quarters, as Q4 2025 revenue was $2.2712 billion, Q3 2025 was $2.2155 billion, and Q2 2025 was $2.2205 billion, indicating a gradual acceleration from the mid-2025 levels. The growth is driven by both segments, with the Solutions Group benefiting from RFID adoption and the Materials Group seeing volume recovery. The company's gross margin improved to 28.92% in Q1 2026, up from 28.65% in Q4 2025, reflecting better cost management and product mix. Net income for Q1 2026 was $168.1 million, with a net margin of 7.31%, slightly down from 7.33% in Q4 2025 but up from 7.51% in Q3 2025, indicating stable profitability. Operating margin stood at 11.83% in Q1 2026, down from 12.39% in Q4 2025, but the company remains solidly profitable with an ROE of 30.69% and ROA of 8.39%.
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?
Given that Avery Dennison has positive net income, the primary valuation metric selected is the P/E ratio. The trailing P/E is 20.67x, while the forward P/E is 15.93x, implying the market expects earnings growth of approximately 29.7% (calculated as (20.67/15.93)-1). This gap suggests investors are pricing in a significant earnings recovery, likely driven by margin expansion and RFID growth. Compared to the industry average P/E of 22.0x (from valuation data), Avery Dennison trades at a slight discount of about 6% (20.67x vs. 22.0x), which is notable given its superior ROE of 30.69% versus the industry average of 18% (from historical ratios). The PEG ratio of 25.78x is elevated, indicating that the market's growth expectations may be too optimistic relative to the current earnings growth rate. Historically, the stock's P/E has ranged from 14.9x to 34.6x over the past few years, with the current 20.67x sitting near the lower end of that range, suggesting the stock is not overvalued relative to its own history.
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 and operational risks are notable. The debt-to-equity ratio of 1.66x indicates significant leverage, which amplifies the impact of rising interest rates; interest expense of $35.6M in Q1 2026 represents a substantial fixed cost. While free cash flow is strong at $872.9M TTM, the company's operating margin has declined to 11.83% from 12.39% in Q4 2025, suggesting cost pressures that could erode profitability if not managed. Revenue concentration in the Materials Group, which is cyclical and tied to packaging demand, exposes the company to economic downturns, as evidenced by the 6.99% growth in Q1 2026 being below the 7.5% growth in Q2 2025.
FAQ
The key risks are: 1) Financial risk from high leverage (debt-to-equity 1.66x), which could strain cash flow if interest rates rise. 2) Competitive risk from alternative labeling technologies and RFID competitors, which could pressure margins. 3) Macro risk from economic cyclicality in the packaging industry, as evidenced by the stock's underperformance vs. the S&P 500 (-19.7% relative strength over 1 year). 4) Company-specific risk of failing to achieve the ~30% earnings growth implied by the forward P/E, leading to multiple compression. The most severe risk is a combination of these factors, potentially driving the stock to its 52-week low of $152.42, a -14.8% downside.
The 12-month forecast is moderately bullish. In the base case (50% probability), the stock reaches the analyst average target of $201.80, driven by steady growth and stable margins. In the bull case (30% probability), the stock could reach $225 if RFID adoption accelerates and margins expand. In the bear case (20% probability), the stock could fall to $152-170 if growth disappoints. The most likely scenario is the base case, assuming revenue growth of 6-7% and stable margins. The key assumption is that the company delivers on its earnings growth potential, which would justify the current valuation.
AVY is fairly valued relative to its history and peers. The trailing P/E of 20.67x is below the industry average of 22.0x and near the lower end of its 5-year range (14.9x-34.6x). The forward P/E of 15.93x implies the market expects significant earnings growth, which is not yet reflected in the price. However, the PEG ratio of 25.78x is extremely high, suggesting that the market's growth expectations may be too optimistic. Overall, the stock is not overvalued, but investors are paying a premium for growth that must materialize.
AVY is a good buy for investors seeking a quality compounder with a reasonable valuation. The stock trades at a trailing P/E of 20.67x, slightly below the industry average of 22.0x, and offers a forward P/E of 15.93x, implying ~30% earnings growth. Analyst consensus is Buy with an average target of $201.80, providing 12.8% upside. However, the high PEG ratio of 25.78x and elevated debt-to-equity of 1.66x are risks. It is a good buy for long-term investors who believe in the RFID growth story, but not for those seeking quick gains or low risk.
AVY is more suitable for long-term investment due to its growth stage, strong profitability, and dividend yield of 2.05%. The stock's beta of 0.812 indicates lower volatility than the market, making it a stable long-term holding. However, the stock has shown significant short-term swings, with a 6-month change of -8.62% and a 1-month change of +14.12%, suggesting it could be traded tactically. For long-term investors, a minimum holding period of 3-5 years is recommended to capture the RFID growth story and allow the earnings growth to materialize. Short-term traders may find opportunities, but the high PEG ratio and cyclicality add risk.