Shares of Avery Dennison (
AVY Quick Quote AVY - Free Report) have been strong performers lately, with the stock up 9.2% over the past month. The stock hit a new 52-week high of $188.81 in the previous session. Avery Dennison has gained 21.3% since the start of the year compared to the 34.1% move for the Zacks Industrial Products sector and the 17.1% return for the Zacks Office Supplies industry. What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on February 3, 2021, Avery Dennison reported EPS of $2.27 versus consensus estimate of $2.17 while it beat the consensus revenue estimate by 3.13%.
For the current fiscal year, Avery Dennison is expected to post earnings of $7.94 per share on $7.48 billion in revenues. This represents a 11.83% change in EPS on a 7.28% change in revenues. For the next fiscal year, the company is expected to earn $8.65 per share on $7.76 billion in revenues. This represents a year-over-year change of 8.98% and 3.72%, respectively.
Avery Dennison may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Avery Dennison has a Value Score of C. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 23.7X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 19.5X versus its peer group's average of 9.9X. Additionally, the stock has a PEG ratio of 3. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Avery Dennison currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Avery Dennison meets the list of requirements. Thus, it seems as though Avery Dennison shares could have a bit more room to run in the near term.
How Does Avery Dennison Stack Up to the Competition?
Shares of Avery Dennison have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Acco Brands (
ACCO Quick Quote ACCO - Free Report) , ScanSource ( SCSC Quick Quote SCSC - Free Report) , and Unifirst ( UNF Quick Quote UNF - Free Report) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 12% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Avery Dennison, even beyond its own solid fundamental situation.