Avery Dennison Corp (AVY)
The Company's businesses include the production of pressure-sensitive materials, office products and a variety of tickets, tags, labels and other converted products.
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on cnbc.com 20 Stocks with the Biggest Potential To Drop
price target 32.5
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This is at a 52 week low.
The label maker is selling for a very reasonable price.
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EVO = 10.00
Est 12 mo range: $84-64
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Buying on the dip, improving sales through acquisition, solid dividend, early leader in RFID tech
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"Safe dividend" cut from $1.64 to $0.80
New dividend payout ratio 66% of projected 2009 net
Sales dropped 20%, Net down 60%+ qtr over qtr
Cash poor ($91M cash facing $2B current liabilities).
Current assets do not cover current liabilities, (0.53 quick ratio).
Debt rich, 1.6 debt to equity ratio.
Wrote down debt $300M to $2B, but increased short term debt $120M
Interest coverage negative
20% of assets are "soft" even after writing off $800M of good will
45% drop in net worth in 8 months
Stock $28, book value $11
Negative tangible book value
Losing market share - sales growth, ROE, and capital investment trail industry figures
Losing stock, $10K invested 5 years ago now $5.2K
With a down market and another poor earings qtr should test the $17.02 low.
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This overvalued goliath has a stock scouter rating of 3 and a CAPS rating of 2.
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Avery Dennison is one of the pioneers in the pressure-sensitive technology and innovative self-adhesive solutions for consumer products and label materials. Company generates revenues from four business segments namely Pressure-Sensitive Materials (57%), Office and Consumer Products (20%), Retail information services (12%) and other specialty converting business (11%).
The demand for pressure-sensitive segment that consists of papers, plastics, metal films and fabrics is set to grow with high demand from industries and new utilities of pressure sensitive adhesive materials. Global forecast for radio frequency identification (RFID) is also positive and Avery Dennison’s business from this technology could rise in 2007 as Wal-Mart, one of their major customers, has plans to equip more stores with RFID technology.
Considering the soft industrial environment in US, management is focusing on organic growth in foreign markets, which could drive revenues in future. Pressure from legal environment has also eased for the company as the investigation regarding the competitive prices in the label stock industry has been closed, which could enable the management to focus on their acquisition plans. Fourth quarter performance of the company saw 3.5% growth in the topline powered by pressure-sensitive and retail information services segment.
Also, company’s business in emerging markets like Asia and Latin America which contribute around 20% to the topline have seen an improved revenue growth this fiscal. Plans to ramp up capacities in China and India would aid the material and retail information service business. Raw material costs are expected to rise in 2007. However, company’s productivity and purchasing initiatives would aid the margins ahead. Further, Avery Dennison is undertaking restructuring exercise to improve its bottom-line, which are expected to save around $ 45 million in fiscal 2007. Looking at these factors, Avery Dennison is set for a bull ride.
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Along with their competitor Raflatac (a division of UPM), AVY is a conservative play on the emerging RFID market with limited downside.
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Consistent dividend payers will outperform.
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stable consumer and office products company with 2.2% dividend yield
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This CAPS account is tracking the 200 highest yielding S&P stocks.
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#24 Worst Toxic Polluter
http://www.peri.umass.edu/toxic100_index/

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