AVERY DENNISON CORPORATION (AVY): what the price requires
At today's price, AVERY DENNISON CORPORATION (AVY) is priced for +1.9% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/AVY
Headline
| Field | Value |
|---|---|
| Ticker | AVY |
| Company | AVERY DENNISON CORPORATION |
| Current price | $159.42/sh |
| Composition | Materials Group 69% / Solutions Group 31% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 6.0% |
| Operating margin today | 10.8% |
| Margin compression implied | -4.8pp |
| Implied growth | 1.9% |
| Multiple paid | 17x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 7.9% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.8pp.
Reconcile: at the x-ray's 9.3% required return this reads ~10.7%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.44σ |
| cohort percentile (of 76 peers) | 46 |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.36x | 4 | expensive |
| Earnings | 1.52x | 4 | expensive |
| Relative | 1.61x | 5 | expensive |
| Growth | 0.99x | 3 | justifies |
Families that justify the price: Growth Families that call it expensive: Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.0%); the inversion above states its own rate.
Per-Model Detail (n=16)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $181.00 | 0.88x | yes | FCF base $0.9B, growth 3% (input: historical growth), terminal g 2.9%, WACC 9.0%, 5yr projection |
| DCF Exit Multiple | Growth | $160.87 | 0.99x | yes | Exit EV/EBITDA: 35.5x / 37.5x / 39.5x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $99.13 | 1.61x | yes | P/E 14x (static sector reference · 2026-04), scenarios: 11.8x / 14.0x / 16.2x (bear / base = reference held flat / bull), EV/EBITDA 16.84x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $96.85 | 1.65x | yes | BV/sh $29.88, ROE (TTM) 30.0%, ke 9.3% |
| Two-Stage Excess Return | Asset | $179.94 | 0.89x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $113.70 | 1.40x | yes | Rev $9.0B, growth 3% (input: historical growth; tapered), Terminal P/S: 1.1x / 1.4x / 1.6x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $106.56 | 1.50x | yes | EPS $8.88, growth 2% (input: historical EPS growth), PEG=7.86 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | $147.66 | 1.08x | yes | BV $29.88 + 5yr PV of (ROE (TTM) 30.0% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $77.26 | 2.06x | yes | √(22.5 × EPS $8.88 × BVPS $29.88) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $30.48 | 5.23x | yes | EBITDA $0.34B × sector EV/EBITDA 8.0x |
| FCF Yield | Earnings | $118.01 | 1.35x | yes | FCF $872.9M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $114.39 | 1.39x | yes | SBC-adj FCF $0.85B (FCF $0.87B − SBC $0.03B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $96.98 | 1.64x | yes | EPS $8.88 × (8.5 + 2×2.3%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | $175.44 | 0.91x | yes | Revenue $9.01B × sector P/S 1.5x |
| PEG Fair Value | Relative | $44.40 | 3.59x | yes | EPS $8.88 × (PEG 1.5 × growth 2.3% (input: historical EPS growth)) → PE 3.4x |
| Earnings Yield | Earnings | $96.00 | 1.66x | yes | EPS $8.88 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $3.5b |
| Net debt / NOPAT (after-tax) | 5.25x |
| Net debt / operating income (pre-tax) | 3.67x |
| Interest coverage | 7.2x |
| Share count CAGR (buyback) | -1.9% |
| Burning cash | no |
Bullet Takeaways
At $158.55 the price pays about 17x company-wide operating income, implying only roughly 2.8% operating growth a year for five years. That is a modest bar for a market-leading label and materials maker, and the reverse-DCF base case lands above the price near $205.
This is a mature compounder, not a growth story, and the numbers should be read that way. Trailing ROE near 30% with a thin book value means asset and earnings-power frames understate the franchise; only the growth DCF reaches the price, the signature of a durability premium the static methods cannot capture.
Q1 2026 was solid: adjusted EPS of $2.47 up 7.4% beat consensus, on sales up 7% to $2.3 billion. The Materials Group carried it while the Solutions Group declined, and the company keeps investing in Intelligent Labels, including a $75 million addition to its Wiliot stake.
Bull Case
Read Avery Dennison as what it is, a mature, cash-generative market leader, and the price stops looking demanding. The company is the dominant supplier of pressure-sensitive label materials, and at this stage the right lens is durability of returns, not a growth ramp. The reverse-DCF implies only about 2.8% operating growth a year for five years to justify $158.55, a pace a global label leader clears in a normal year. Mature businesses are priced on the persistence of their economics, and Avery Dennison earns a trailing ROE near 30% on a relatively thin book.
The Q1 2026 print supports the read. Adjusted EPS of $2.47 rose 7.4% and beat the $2.43 consensus, on net sales of $2.3 billion up 7%. The Materials Group, which is the larger and structurally higher-return segment, grew sales 11.4% with volume, mix, and productivity offsetting price deflation. Operating cash flow swung to $136.5 million from a use of cash a year earlier, with adjusted free cash flow of $104.4 million, the cash conversion that a quality compounder shows even in a soft demand year. The FY2025 10-K detail on taxes and valuation allowances underscores a mature company managing its effective rate rather than chasing top-line at any cost.
The optionality is Intelligent Labels. Avery Dennison added a $75 million incremental investment in Wiliot to strengthen its RFID-enabled labeling platform, the part of the business that turns a commodity label into a connected data point for retail and supply-chain tracking. That is a real growth vector layered on a stable core, and the static valuation frames cannot price it because it does not yet show up in trailing earnings. With the implied growth bar this low, the durability of the core plus any traction in Intelligent Labels is upside the price is not paying for.
Bear Case
The structural truth a holder would rather not face is that the multiples are pricing what has not happened yet: only the growth DCF reaches $158.55 (June 27, 2026), and every static frame says richly valued. The relative P/E mark lands near $99 on a 14x sector median, EV/EBITDA relative near $30, the Graham number near $77, and the simple excess-return mark near $97.
The core business is also more cyclical and lower-growth than the bull framing admits. Q1 organic growth was just 1.1%, and the Solutions Group, the higher-value-added segment that is supposed to be the growth engine, saw sales fall 2.8% with margin pressure from softer base categories and higher investment. Materials Group grew on volume and productivity while absorbing price deflation, which is the tell of a maturing, competitive label market where pricing power is limited. The company recorded $15.9 million of restructuring charges tied to roughly 370 position cuts, a sign that management is defending margins against a sluggish demand backdrop rather than riding a tailwind.
The balance sheet carries real leverage into that picture. Net debt is roughly $3.5 billion against trailing operating income near $958 million, about 3.7x, with interest coverage near 6.8x. That is manageable in good times but limits flexibility if the label and packaging cycle softens further or if the Wiliot and Intelligent Labels investments take longer to pay off than the bull case assumes. The Solutions Group weakness and continued price deflation in Materials are the near-term reality; Intelligent Labels is the promise. The price is paying for the promise while the reality is a low-organic-growth, levered, mature industrial whose value the conservative frames put closer to $100 to $130 than to $158.
Valuation
Inverting the $158.55 price is the anchor. At that level the market pays about 17x company-wide operating income, which under a 9.0% cost of capital implies operating growth of only roughly 2.8% a year for five years. That is a low bar, and it reads as within range against Avery Dennison's own history. The reverse-DCF range is wide, from a low near $187 to a base near $205, reflecting the value of a durable franchise priced for minimal growth. The characterization is a moat or durability premium: the static frames structurally cannot price the persistence of a market leader's returns.
The model X-ray shows that split clearly. Only the growth DCF reaches the price, a perpetual-growth DCF near $181 and a DCF exit-multiple near $160. Every other family sits below. The relative P/E mark is near $99, EV/EBITDA relative near $30, and the asset frames range from a Graham number near $77 to a two-stage excess-return mark near $180. The earnings-power value mark collapses toward zero because normalized five-year average EBIT is depressed, an artifact of cyclical operating income rather than a real read on the franchise. The FCF-yield marks near $114 to $118 are more representative of the cash the business actually throws off.
The spread is the information. The price is not a verdict on whether Avery Dennison is a good business. It is a measure of how much durability and Intelligent Labels optionality the market has booked: a modest growth rate sustained for years, plus a premium for economics the static methods cannot capture.
Catalysts
The near-term driver is the 2026 earnings cadence against guidance. Q1 2026 adjusted EPS of $2.47 beat consensus and grew 7.4%, and management guided Q2 to adjusted EPS of $2.43 to $2.53. Whether the Materials Group momentum continues and the Solutions Group stabilizes is the swing factor for the back half.
Intelligent Labels is the structural catalyst. The $75 million incremental investment in Wiliot strengthens the RFID-enabled labeling platform, and adoption in retail apparel, food, and logistics is the growth vector layered on the stable materials core. Traction there is the upside the static valuation does not yet price.
Margin and cost actions are the watch item. The company took $15.9 million of restructuring charges tied to about 370 position reductions, and price deflation in Materials plus softer Solutions categories are pressuring mix. Watch organic growth by segment, free-cash-flow conversion (Q1 adjusted FCF was $104.4 million), the pace of Intelligent Labels adoption, and any change in the label and packaging demand cycle.
Sources: StockTitan and Investing.com (AVY Q1 2026 results, $2.47 adjusted EPS beat, Q2 guidance), Sahm Capital and Panabee (segment performance, Materials up 11.4%, Solutions down 2.8%, Wiliot $75M investment, restructuring charges and headcount).
Peer Cohorts (Per Segment, With Filing Citations)
Materials Group (reported)
- AVNT (AVIENT CORPORATION)
- (no filing in the citation store)
- CE (CELANESE CORPORATION)
- (no filing in the citation store)
- EMN (EASTMAN CHEMICAL CO)
- (no filing in the citation store)
- PPG (PPG INDUSTRIES INC)
- (no filing in the citation store)
- RPM (RPM International Inc.)
- (no filing in the citation store)
- FUL (FULLER H B CO)
- (no filing in the citation store)
Solutions Group (reported)
- GPK (Graphic Packaging Holding Co)
- (no filing in the citation store)
- REYN (REYNOLDS CONSUMER PRODUCTS INC.)
- (no filing in the citation store)
- SLVM (SYLVAMO CORPORATION)
- (no filing in the citation store)
- PKG (PACKAGING CORP OF AMERICA)
- (no filing in the citation store)
- SW (Smurfit Westrock plc)
- (no filing in the citation store)
- IP (INTERNATIONAL PAPER COMPANY)
- (no filing in the citation store)
- KMB (KIMBERLY-CLARK CORPORATION)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.