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Avery Dennison Corporation (AVY) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Avery Dennison Corporation (AVY)

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Intrinsic Value (DCF)

Current$189.08
→
Intrinsic$225.64
+19%
$142.62$225.64$383.25
Market implies 16% growth for 5 years
AVY shows 19% potential upside using 20% growth — reasonable if fundamentals hold.
At $189, the market prices in continued high-teens cash flow growth (16%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $143 → Bull $383. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →16%18%20%22%
8%$282$309$337$367
10%$188$206$226$246
12%$136$150$164$179
14%$103$114$125$137

Bull Case

  • Bull case ($383) offers 103% upside at 23% growth, 9% discount
  • 16% margin of safety vs. base case estimate
  • Market-implied growth (16%) ≤ historical CAGR (20%)

Bear Case

  • Bear case ($143) implies 25% downside at 16% growth, 12% discount
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5-Year Free Cash Flow Projection

Year 1$872.96M
Year 2$1.04B
Year 3$1.25B
Year 4$1.49B
Year 5$1.79B
Terminal$26.27B

📐 Model Inputs

Growth Rate19.6%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$730.00MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is AVY stock undervalued or overvalued?
🟢 UNDERVALUED

AVY trades at $189.08 vs. our DCF-derived intrinsic value of $225.64, implying +24% upside. At a 10.0% WACC and 19.6% projected FCF growth, the market appears to be underpricing the present value of AVY's future cash flows. The bear case ($136.50) still suggests upside, providing margin of safety.

What is AVY's intrinsic value?

Using a 5-year DCF model: Base FCF of $730M, projected at 19.6% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $2.82B net debt and dividing by 0.08B shares: Bear $136.50 | Base $225.64 | Bull $356.51. Current price $189.08 implies +24% to base case.

How is AVY's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 19.6% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($21.03B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 28.8x.