Is it time to put Avery Dennison (NYSE: AVY) on your watchlist?
For newbies, it might seem like a good idea (and an exciting prospect) to buy a business that tells investors a good story, even if it lacks a history of revenue and profit altogether. But the reality is that when a business loses money every year, for long enough, its investors will usually take their share of those losses.
So if you’re like me, you might be more interested in profitable and growing businesses like Avery dennison (NYSE: AVY). While profit isn’t necessarily social good, it’s easy to admire a business that can consistently produce it. While a well-funded business can suffer losses for years, unless its owners have an endless appetite to subsidize the customer, it will eventually have to generate a profit, or else take its last breath.
See our latest review for Avery Dennison
How fast is Avery Dennison increasing its earnings per share?
If a company can sustain earnings per share (EPS) growth long enough, its stock price will eventually follow. This makes the growth of BPA an attractive quality for any business. Who among us wouldn’t applaud Avery Dennison’s annual stratospheric growth in BPA of 42%, compound, over the past three years? While this type of growth rate is not sustainable for long, it certainly catches my eye; like a crow with a sparkling stone.
A close look at revenue growth and profit before interest and tax (EBIT) margins can help shed light on the sustainability of recent earnings growth. Avery Dennison has maintained stable EBIT margins over the past year, while increasing revenue 16% to US $ 7.9 billion. It’s really positive.
In the graph below, you can see how the company has increased its profit and revenue over time. For more details, click on the image.
You don’t drive with your eyes on the rearview mirror, so this may be of more interest to you free report showing analyst forecasts for Avery Dennison’s future profits.
Are Avery Dennison Insiders Aligned With All Shareholders?
We wouldn’t expect to see insiders owning a significant percentage of an $ 18 billion company like Avery Dennison. But we are reassured by the fact that they have invested in the company. Indeed, they have invested a sparkling mountain of wealth, currently valued at US $ 117 million. This suggests to me that management will be very attentive to the interests of shareholders when making a decision!
It means a lot to see insiders investing in the company, but I wonder if the compensation policies are shareholder friendly. Well, based on CEO pay, I would say they are indeed. For companies with market capitalizations over $ 8.0 billion, like Avery Dennison, the median CEO salary is around $ 11 million.
Avery Dennison offered total compensation worth $ 8.7 million to its CEO during the year at. This is lower than the average for similar sized companies and seems pretty reasonable to me. CEO compensation isn’t the most important aspect of a business to consider, but when it’s reasonable, it gives me a little more confidence that executives are looking out for the interests of shareholders. I would also say that reasonable pay levels are a testament to good decision making more generally.
Is Avery Dennison Worth Watching?
Avery Dennison’s earnings per share growth levitated, like a mountain goat scaling the Alps. The sweetener is that insiders have a mountain of stocks, and the CEO’s pay is quite reasonable. The strong increase in profits could be a sign of good business momentum. Avery Dennison certainly ticks a few of my boxes, so I think it probably deserves a closer look. Even so, know that Avery Dennison shows 1 warning sign in our investment analysis , you must know…
Of course, you can (sometimes) buy stocks that are not growing income and not have insiders who buy stocks. But as a growth investor, I always like to check out companies that to do have these characteristics. You can access a free list of them here.
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in the mentioned stocks.
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