Critical Survey: Avery Dennison (NYSE:AVY) versus Packaging Corporation of America (NYSE:PKG)

Avery Dennison (NYSE:AVY) and Packaging Corporation of America (NYSE:PKG) are both large-cap industrials companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, risk, analyst recommendations, earnings, valuation, profitability and institutional ownership.

Analyst Ratings

This is a breakdown of current ratings and price targets for Avery Dennison and Packaging Corporation of America, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Avery Dennison	0	3	9	0	2.75
Packaging Corporation of America	1	4	3	1	2.44

Avery Dennison currently has a consensus target price of $200.55, indicating a potential upside of 9.87%. Packaging Corporation of America has a consensus target price of $230.67, indicating a potential upside of 12.65%. Given Packaging Corporation of America’s higher probable upside, analysts plainly believe Packaging Corporation of America is more favorable than Avery Dennison.

Volatility & Risk

Avery Dennison has a beta of 1.01, indicating that its stock price is 1% more volatile than the S&P 500. Comparatively, Packaging Corporation of America has a beta of 0.89, indicating that its stock price is 11% less volatile than the S&P 500.

Dividends

Avery Dennison pays an annual dividend of $3.76 per share and has a dividend yield of 2.1%. Packaging Corporation of America pays an annual dividend of $5.00 per share and has a dividend yield of 2.4%. Avery Dennison pays out 42.8% of its earnings in the form of a dividend. Packaging Corporation of America pays out 50.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Avery Dennison has raised its dividend for 15 consecutive years.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Avery Dennison	7.93%	33.67%	8.76%
Packaging Corporation of America	10.18%	19.72%	9.53%

Institutional and Insider Ownership

94.2% of Avery Dennison shares are held by institutional investors. Comparatively, 89.8% of Packaging Corporation of America shares are held by institutional investors. 0.8% of Avery Dennison shares are held by company insiders. Comparatively, 1.5% of Packaging Corporation of America shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares Avery Dennison and Packaging Corporation of America”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Avery Dennison	$8.76 billion	1.61	$704.90 million	$8.79	20.77
Packaging Corporation of America	$8.38 billion	2.20	$805.10 million	$9.89	20.70

Packaging Corporation of America has lower revenue, but higher earnings than Avery Dennison. Packaging Corporation of America is trading at a lower price-to-earnings ratio than Avery Dennison, indicating that it is currently the more affordable of 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 Packaging Corporation of America

Packaging Corporation of America engages in the production of container products. It operates through the following segments: Packaging, Paper, and Corporate and Other. The Packaging segment offers a variety of corrugated packaging products, such as conventional shipping containers. The Paper segment manufactures and sells a range of papers, including communication-based papers, and pressure sensitive papers. The Corporate and Other segment focuses on transportation assets, such as rail cars, and trucks. The company was founded in 1959 and is headquartered in Lake Forest, IL.