Avery Dennison (NYSE:AVY) & Packaging Corporation of America (NYSE:PKG) Critical Analysis

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

Dividends

Packaging Corporation of America pays an annual dividend of $5.00 per share and has a dividend yield of 2.3%. Avery Dennison pays an annual dividend of $3.76 per share and has a dividend yield of 2.0%. Packaging Corporation of America pays out 50.6% of its earnings in the form of a dividend. Avery Dennison pays out 42.8% 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.

Valuation and Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Packaging Corporation of America	$8.38 billion	2.35	$805.10 million	$9.89	22.17
Avery Dennison	$8.76 billion	1.66	$704.90 million	$8.79	21.43

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

Volatility and Risk

Packaging Corporation of America has a beta of 0.88, suggesting that its stock price is 12% less volatile than the S&P 500. Comparatively, Avery Dennison has a beta of 1, suggesting that its stock price has a similar volatility profile to the S&P 500.

Profitability

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

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

Insider & Institutional Ownership

89.8% of Packaging Corporation of America shares are owned by institutional investors. Comparatively, 94.2% of Avery Dennison shares are owned by institutional investors. 1.5% of Packaging Corporation of America shares are owned by insiders. Comparatively, 0.8% of Avery Dennison shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Packaging Corporation of America	0	4	4	1	2.67
Avery Dennison	0	3	9	0	2.75

Packaging Corporation of America currently has a consensus price target of $235.33, indicating a potential upside of 7.35%. Avery Dennison has a consensus price target of $204.36, indicating a potential upside of 8.51%. Given Avery Dennison’s stronger consensus rating and higher possible upside, analysts plainly believe Avery Dennison is more favorable than Packaging Corporation of America.

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.

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.