Markets like the present one often allow high-quality companies to be available at bargain basement prices. Here then, is a good-yielding stock with very nice upside and below average risk.
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Avery Dennison Corporation [NYSE:AVY] March 11, 2008 close $46.90
52-week range: $44.06 [March 10, 2008] - $68.78 [July 17, 2007]
Yield = 3.5%
Avery Dennison products are almost certainly in your home or office. They make and market self adhesive labels and tapes, assorted office products and specialty chemical adhesives. Pressure sentive products are about 58% of sales, office and consumer products 19% and the remaining 23% coming mainly from retail information services.
AVY has been a very steady grower over the long term with higher earnings in 15 of the past 17 years. In 16 of those 17 years revenues increased with the only exception being the recession year of 2001. Despite the slow US economy Avery Denison management recently forecast 2008 EPS of $4.15 - $4.55 [net of a one-time restructuring charge] up from a record $3.91 in 2007.
Consensus estimates are focused on $4.24 for this year and $4.82 for 2009. Thus AVY shares now trade at just 11.1x this year's operating earnings and
AVY has a 10-year median P/E of 21x and Value Line is assuming a conservative 16 multiple for their 3 - 5 year outlook.
Even 16 times the low-end company estimate of $4.15 would get these shares back to $66.40 or plus 41.5% from today's close. Add in the 3.5% dividend and a 45% total return over the next 12 months looks attainable.
Is that crazy? Not based on AVY's trading history. Avery shares have hit peak prices of $63.60 - $71.40 in each of the calendar years 2002 through 2007. They actually traded at highs of $62.10 - $78.50 way back in 1998 - 2000 when EPS were $2.15 - $2.84.
At today's quote AVY shares are LOWER than the LOWS at any point in 2004 - 2007.
Value Line rates AVY's financial strength an 'A' and their earnings predictability at the 95th percentile. Value Line rates them above average for safety.The dividend has been increased in 14 of the past 15 years.
Who else likes these shares:
As of Dec. 31, 2007: [Year-end close: $53.14]
Capital Research Global Inv. held 8.55%
T. Rowe Price owned 6.02%
Bank of America had 4.68%
Wellington Capital Mgt. held 4.54%
Barclays Gloibal owned 4.19%
Vanguard Group had 3.54%
Guru Ownership at year-end 2007:
Dodge & Cox
Brian Rodgers
Robert Olstein
Arnold Van Den berg
Richard Aster
Since last August there have been 4 insider buys versus just 1 sell.
All the buys came at prices between $50.91 - $60.66 , well above today's close.
Avery Dennison seems to offer a great package right now. They are trading at their lowest P/E in more than 17 years and with their best yield ever. Yet they sport the highest sales, earnings, cash flow and book value in their history.
With shares near seven-year absolute lows I'd give them one of their own gold stars for valuation.
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Avery Dennison Corporation [NYSE:AVY] March 11, 2008 close $46.90
52-week range: $44.06 [March 10, 2008] - $68.78 [July 17, 2007]
Yield = 3.5%
Avery Dennison products are almost certainly in your home or office. They make and market self adhesive labels and tapes, assorted office products and specialty chemical adhesives. Pressure sentive products are about 58% of sales, office and consumer products 19% and the remaining 23% coming mainly from retail information services.
AVY has been a very steady grower over the long term with higher earnings in 15 of the past 17 years. In 16 of those 17 years revenues increased with the only exception being the recession year of 2001. Despite the slow US economy Avery Denison management recently forecast 2008 EPS of $4.15 - $4.55 [net of a one-time restructuring charge] up from a record $3.91 in 2007.
Consensus estimates are focused on $4.24 for this year and $4.82 for 2009. Thus AVY shares now trade at just 11.1x this year's operating earnings and
AVY has a 10-year median P/E of 21x and Value Line is assuming a conservative 16 multiple for their 3 - 5 year outlook.
Even 16 times the low-end company estimate of $4.15 would get these shares back to $66.40 or plus 41.5% from today's close. Add in the 3.5% dividend and a 45% total return over the next 12 months looks attainable.
Is that crazy? Not based on AVY's trading history. Avery shares have hit peak prices of $63.60 - $71.40 in each of the calendar years 2002 through 2007. They actually traded at highs of $62.10 - $78.50 way back in 1998 - 2000 when EPS were $2.15 - $2.84.
At today's quote AVY shares are LOWER than the LOWS at any point in 2004 - 2007.
Value Line rates AVY's financial strength an 'A' and their earnings predictability at the 95th percentile. Value Line rates them above average for safety.The dividend has been increased in 14 of the past 15 years.
Who else likes these shares:
As of Dec. 31, 2007: [Year-end close: $53.14]
Capital Research Global Inv. held 8.55%
T. Rowe Price owned 6.02%
Bank of America had 4.68%
Wellington Capital Mgt. held 4.54%
Barclays Gloibal owned 4.19%
Vanguard Group had 3.54%
Guru Ownership at year-end 2007:
Dodge & Cox
Brian Rodgers
Robert Olstein
Arnold Van Den berg
Richard Aster
Since last August there have been 4 insider buys versus just 1 sell.
All the buys came at prices between $50.91 - $60.66 , well above today's close.
Avery Dennison seems to offer a great package right now. They are trading at their lowest P/E in more than 17 years and with their best yield ever. Yet they sport the highest sales, earnings, cash flow and book value in their history.
With shares near seven-year absolute lows I'd give them one of their own gold stars for valuation.
