AVY
Avery Dennison Corporation
$159.66
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 65.5% above fair value
You pay
$159.66
Bear
$59.38
Fair
$96.49
Bull
$133.60
Bear
$59.38
-62.8%
$8.78 × 7x + net cash
Fair
$96.49
-39.6%
$8.78 × 10x + net cash
Bull
$133.60
-16.3%
$8.78 × 12x + net cash
Key Value Driver
Through-cycle normalized EPS ($8.78)
Implied Market Multiple
18.2x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $214.75 from 18 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $96.49 per share.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
Wall Street's average price target is $214.75 (from 18 analysts). Our estimate is 73% below the consensus -- consider that gap carefully.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing