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    How Investors Are Reacting To Avery Dennison (AVY) Slower Organic Growth And Rising Capital Intensity

    Simply Wall St·12/10/2025 21:14:24
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    • Avery Dennison recently reported that its organic revenue growth has averaged 2.5% year-on-year over the past two years, alongside a 2.5 percentage point drop in free cash flow margin and a 4.9 percentage point annual decline in return on invested capital, pointing to rising capital intensity and profitability pressure.
    • Taken together, the slower organic sales, weaker cash generation, and shrinking returns suggest Avery Dennison may need to rethink its growth approach, potentially leaning more on acquisitions or portfolio shifts as competition intensifies in its core markets.
    • Next, we will examine how slower organic revenue growth challenges Avery Dennison’s existing investment narrative and what this could mean for investors.

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    Avery Dennison Investment Narrative Recap

    To own Avery Dennison, you need to believe its materials science and digital ID platforms can still compound value even as growth normalizes and capital intensity rises. The recent slowdown in organic revenue and pressure on free cash flow and ROIC sharpen the near term focus on whether Intelligent Labels can offset softness in apparel and retail, while the biggest current risk remains that competition and end market weakness further erode returns.

    Against this backdrop, the board’s decision in April 2025 to lift the quarterly dividend to US$0.94 per share, and then affirm it, is relevant because it underlines management’s confidence in ongoing cash generation at a time when reported free cash flow margins have been trending lower, putting more weight on the company’s ability to sustain both investment and shareholder returns.

    Yet investors should be aware that rising capital intensity and shrinking returns could limit Avery Dennison’s flexibility if...

    Read the full narrative on Avery Dennison (it's free!)

    Avery Dennison's narrative projects $9.8 billion revenue and $909.0 million earnings by 2028. This requires 4.0% yearly revenue growth and about a $198 million earnings increase from $711.0 million today.

    Uncover how Avery Dennison's forecasts yield a $202.36 fair value, a 17% upside to its current price.

    Exploring Other Perspectives

    AVY 1-Year Stock Price Chart
    AVY 1-Year Stock Price Chart

    Three fair value estimates from the Simply Wall St Community span roughly US$165 to US$344 per share, showing how far apart individual views can be. When you set this against slowing organic growth and weaker free cash flow margins, it underlines why understanding differing expectations for Avery Dennison’s future profitability really matters.

    Explore 3 other fair value estimates on Avery Dennison - why the stock might be worth just $165.12!

    Build Your Own Avery Dennison Narrative

    Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

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    This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.