AVY
Avery Dennison Corporation
$160.41
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 70.8% above fair value
You pay
$160.41
Bear
$57.79
Fair
$93.90
Bull
$130.02
Bear
$57.79
-64.0%
$8.78 × 7x + net cash
Fair
$93.90
-41.5%
$8.78 × 10x + net cash
Bull
$130.02
-18.9%
$8.78 × 12x + net cash
Key Value Driver
Through-cycle normalized EPS ($8.78)
Implied Market Multiple
18.3x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $204.40 from 18 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $93.90 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 $204.40 (from 18 analysts). Our estimate is 72% 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