Today we're going to take a look at the well-established Avery Dennison Corporation (NYSE:AVY). The company's stock saw its share price hover around a small range of US$209 to US$229 over the last few weeks. But is this actually reflective of the share value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Avery Dennison's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is Avery Dennison Worth?
According to our valuation model, Avery Dennison seems to be fairly priced at around 20% below our intrinsic value, which means if you buy Avery Dennison today, you'd be paying a fair price for it. And if you believe that the stock is really worth $283.49, then there's not much of an upside to gain from mispricing. What's more, Avery Dennison's share price may be more stable over time (relative to the market), as indicated by its low beta.
Can we expect growth from Avery Dennison?
Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. With profit expected to grow by 67% over the next couple of years, the future seems bright for Avery Dennison. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has already priced in AVY's positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven't considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you've been keeping tabs on AVY, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it's worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Avery Dennison at this point in time. At Simply Wall St, we found 2 warning signs for Avery Dennison and we think they deserve your attention.
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.
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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.