Critical Analysis: Avery Dennison (NYSE:AVY) & Karat Packaging (NASDAQ:KRT)

Avery Dennison (NYSE:AVY) and Karat Packaging (NASDAQ:KRT) are both industrials companies, but which is the better investment? We will compare the two businesses based on the strength of their institutional ownership, profitability, analyst recommendations, dividends, valuation, earnings and risk.

Analyst Ratings

This is a summary of recent ratings for Avery Dennison and Karat Packaging, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Avery Dennison	0	5	6	0	2.55
Karat Packaging	0	3	1	0	2.25

Avery Dennison currently has a consensus target price of $197.60, suggesting a potential upside of 19.93%. Karat Packaging has a consensus target price of $31.67, suggesting a potential upside of 30.85%. Given Karat Packaging’s higher possible upside, analysts clearly believe Karat Packaging is more favorable than Avery Dennison.

Insider & Institutional Ownership

94.2% of Avery Dennison shares are held by institutional investors. Comparatively, 25.2% of Karat Packaging shares are held by institutional investors. 0.8% of Avery Dennison shares are held by insiders. Comparatively, 66.2% of Karat Packaging shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Avery Dennison and Karat Packaging”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Avery Dennison	$8.76 billion	1.47	$704.90 million	$8.91	18.49
Karat Packaging	$422.63 million	1.15	$29.98 million	$1.59	15.22

Avery Dennison has higher revenue and earnings than Karat Packaging. Karat Packaging is trading at a lower price-to-earnings ratio than Avery Dennison, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Avery Dennison and Karat Packaging’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Avery Dennison	8.14%	33.14%	8.91%
Karat Packaging	7.25%	20.26%	10.65%

Dividends

Avery Dennison pays an annual dividend of $3.76 per share and has a dividend yield of 2.3%. Karat Packaging pays an annual dividend of $1.80 per share and has a dividend yield of 7.4%. Avery Dennison pays out 42.2% of its earnings in the form of a dividend. Karat Packaging pays out 113.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Avery Dennison has increased its dividend for 15 consecutive years and Karat Packaging has increased its dividend for 2 consecutive years.

Risk and Volatility

Avery Dennison has a beta of 0.9, suggesting that its stock price is 10% less volatile than the S&P 500. Comparatively, Karat Packaging has a beta of 1.11, suggesting that its stock price is 11% more volatile than the S&P 500.

Summary

Avery Dennison beats Karat Packaging on 12 of the 17 factors compared between the two stocks.

About Avery Dennison

Avery Dennison Corporation operates as a materials science and digital identification solutions company in the United States, Europe, the Middle East, North Africa, Asia, Latin, America, and internationally. It provides pressure-sensitive materials comprising papers, plastic films, metal foils, and fabrics; performance tapes products, including tapes for wire harnessing, as well as cable wrapping for automotive, electrical, and general industrial applications; mechanical fasteners, which are precision-extruded and injection-molded plastic devices used in various automotive, general industrial, and retail applications; and other pressure-sensitive adhesive-based materials and converted products under the Fasson, JAC, Yongle, and Avery Dennison brands. The company also offers graphics and reflective products for the architectural, commercial sign, digital printing, and other related market segments; durable cast and reflective films to the construction, automotive, and fleet transportation market segments; reflective films for traffic and safety applications; and pressure-sensitive vinyl and specialty materials designed for digital imaging, screen printing, and sign cutting applications under the Avery Dennison and Mactac brand names. In addition, it provides branding solutions include brand embellishments, graphic tickets, tags, and labels, and sustainable packaging; and information solutions include item-level RFID, visibility and loss prevention, price ticketing and marking, productivity and media solutions, and brand protection and security solutions, as well as care, content, and country of origin compliance solutions. It serves home and personal care, apparel, e-commerce, logistics, food and grocery, pharmaceuticals, and automotive industries. The company was formerly known as Avery International Corporation and changed its name to Avery Dennison Corporation in 1990. Avery Dennison Corporation was founded in 1935 and is headquartered in Mentor, Ohio.

About Karat Packaging

Karat Packaging Inc., together with its subsidiaries, engages in the manufacture and distribution of single-use disposable products in plastic, paper, biopolymer-based, and other compostable forms used in various restaurant and foodservice settings. It provides food and take-out containers, bags, tableware, cups, lids, cutlery, straws, specialty beverage ingredients, equipment, gloves, and other products under the Karat Earth brand. The company also provides new product development, design, printing, and logistics services. It offers its products to national and regional distributors, restaurant chains, retail establishments, and online customers. The company was founded in 2000 and is based in Chino, California.