# Avery Dennison (AVY) Financial Model Free Excel 3-statement financial model and company analysis for Avery Dennison. - Canonical: https://finamodel.com/companies/avery-dennison - Industry: Packaging - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/AVY.xlsx ## Model Purpose To evaluate Avery Dennison's equity valuation and cash flow generation capacity, focusing on the margin expansion driven by its high-growth Intelligent Labels (RFID) business and the cash-generative resilience of its core Materials Group. ## Company Overview - Avery Dennison is a global materials science and digital identification solutions company that designs and manufactures pressure-sensitive materials, radio-frequency identification (RFID) inlays, and tags. - **Business segments:** Materials Group (approximately 69% of net sales) and Solutions Group (approximately 31% of net sales). - **Key geographies:** Highly international, with approximately 70% of net sales generated outside the United States. - **Business model type:** Asset-heavy manufacturing combined with high-tech digital identification and software platforms (such as atma.io). - **Competitive position:** Global market leader in pressure-sensitive labelling materials and the dominant player in the fast-growing UHF RFID market. Key peers include CCL Industries, UPM-Kymmene, and Amcor. - **Recent major events:** In late 2025, the company acquired W.F. Taylor Holdings (a flooring adhesives business) for approximately $390 million. The company also executed a restructuring programme in 2025, incurring $48.8 million in charges and reducing headcount by approximately 1,200 positions to optimise its operational footprint. ## Revenue Deep Dive ### Materials Group - **Segment name:** Materials Group - **Revenue driver formula:** Volume (square metres of pressure-sensitive materials) x Price/Mix - **Historical growth rate:** Low single-digit (0% to 3% CAGR) - **Key growth levers and headwinds:** Driven by global packaging demand, e-commerce shipping volumes, and consumer packaged goods. Headwinds include destocking cycles and raw material deflation. - **Pricing dynamics:** Highly sensitive to raw material costs (paper, films, chemicals). The company typically passes through raw material deflation or inflation to customers, which can artificially depress or inflate top-line revenue without impacting gross profit dollars. - **Revenue recognition notes:** Recognised at a point in time upon shipment or delivery. - **Seasonality:** Relatively stable across the year, with slight dips in Q4 due to fewer shipping days. ### Solutions Group - **Segment name:** Solutions Group - **Revenue driver formula:** Volume (RFID tags, apparel tickets, labels) x Price/Unit - **Historical growth rate:** Mid-to-high single-digit (5% to 8% CAGR), driven by double-digit growth in Intelligent Labels. - **Key growth levers and headwinds:** Rapid adoption of RFID technology in apparel, logistics, and food retail. Headwinds include cyclical downturns in global apparel manufacturing and retail inventory corrections. - **Pricing dynamics:** Competitive but supported by technological leadership and scale in RFID inlay manufacturing. - **Revenue recognition notes:** Primarily point-in-time for physical tags, with a small but growing deferred revenue component for software solutions (atma.io). - **Seasonality:** Q3 is typically the strongest quarter as apparel retailers build inventory ahead of the holiday shopping season. ## Cost Structure ### Variable Costs / COGS - **Line-by-line breakdown:** Raw materials (paper, films, adhesives, chemicals), direct manufacturing labour, freight, and factory overhead. - **Gross margin range:** 26% to 29% (recently operating near 28.6% in FY2025). - **Key input costs and commodity exposures:** Pulp, paper, petrochemical-based films, and specialty chemicals. - **How COGS scales with revenue:** Largely linear with volume, though raw material pass-through pricing means gross margin percentages can fluctuate inversely with commodity prices. ### Operating Expenses - **R&D:** Typically 1.5% to 2.0% of revenue (approximately $137 million in 2025), focused on materials science and digital identification technologies. - **SG&A:** Approximately 14% to 16% of revenue, heavily driven by sales headcount, marketing, and corporate administrative costs. - **Depreciation & Amortisation:** Approximately 3% to 4% of revenue, split between tangible manufacturing equipment and amortisation of acquired intangibles. - **Stock-Based Compensation:** Approximately 0.5% to 1.0% of revenue. - **Restructuring / one-time charges:** Frequent and material. The company regularly optimises its footprint, recording $48.8 million in charges in 2025. ### Margin Profile - **Gross margin:** 26% to 29% - **EBITDA margin:** 15% to 17% - **Operating margin:** 11% to 13% (Adjusted operating margin for Materials Group is typically 14% to 16%, while Solutions Group is 10% to 12%). - **Net margin:** 7.5% to 8.5% - **Margin trend:** Expanding slightly due to a richer product mix (faster growth in high-margin Intelligent Labels) and continuous restructuring savings, offset by wage inflation. ## Balance Sheet Structure - **Total assets:** Approximately $8.5 billion to $9.0 billion. - **Key asset categories:** Accounts receivable, inventory, property, plant and equipment (PP&E), and goodwill. - **Goodwill & intangibles as % of total assets:** Approximately 30% to 35%, reflecting a history of bolt-on acquisitions (Vestcom, Smartrac, W.F. Taylor). - **Working capital profile:** - **Days Sales Outstanding (DSO):** 55 to 60 days - **Days Inventory Outstanding (DIO):** 50 to 55 days - **Days Payable Outstanding (DPO):** 65 to 70 days - **Net working capital as % of revenue:** Approximately 8% to 10%. - **Is working capital positive or negative?** Positive. The company requires modest working capital investment to fund growth. - **PP&E:** Consists of global coating, slitting, and converting facilities, plus RFID manufacturing sites. Useful lives range from 3 to 15 years for machinery. - **Right-of-use assets / operating leases:** Material, representing approximately $300 million to $400 million for leased facilities globally. ## Capital Expenditure & Investment - **Capex as % of revenue:** 2.5% to 3.5% (approximately $200 million in 2025). - **Maintenance capex vs. growth capex:** Roughly 40% maintenance, 60% growth (heavily skewed towards expanding RFID manufacturing capacity, such as recent investments in India). - **Major capex programmes underway or planned:** Expansion of Intelligent Labels capacity and automation of Materials Group facilities. - **Capitalised software / development costs:** Minimal relative to total capex. - **M&A pattern:** Serial bolt-on acquirer focusing on high-value categories and adjacent technologies. - **Typical acquisition multiple paid:** 10x to 13x EV/EBITDA for high-growth assets. ## Debt & Capital Structure - **Total debt:** Approximately $3.2 billion in long-term debt. - **Debt/EBITDA ratio:** Currently around 2.6x, with a target range of 2.0x to 2.5x. - **Credit rating:** Investment grade (BBB/Baa2). - **Key debt instruments:** Unsecured senior notes (including a recent €500 million 4.000% issuance due 2035) and a revolving credit facility. - **Maturity profile:** Well-laddered with average maturities exceeding 5 years. - **Interest rate profile:** Predominantly fixed-rate bonds. - **Covenants:** Standard investment-grade covenants (interest coverage and leverage maximums). - **Share repurchase programme:** Highly active. The company repurchased 3.2 million shares for approximately $572 million in 2025. - **Dividend policy:** Consistent grower. Declared $0.94 per share quarterly in early 2026 ($3.76 annualised), representing a yield of approximately 2.1% and a payout ratio of roughly 40%. ## Cash Flow Characteristics - **Operating cash flow conversion:** Strong, typically 1.2x to 1.4x of Net Income due to high D&A and stable working capital management. - **Free cash flow margin:** 8% to 13% (generated over $720 million in TTM FCF in 2025). - **Major non-cash items:** Depreciation, amortisation of acquired intangibles, stock-based compensation, and restructuring impairments. - **Working capital cash flow impact:** Modest use of cash during periods of volume growth. - **Capex intensity:** Low to moderate (under 4% of sales), allowing for high free cash flow conversion. - **Cash tax rate vs. GAAP effective tax rate:** Cash taxes generally track the effective tax rate of 24% to 26%, though geographic mix can cause slight deviations. ## Sheet Structure 1. **Assumptions**: Hardcoded inputs for macroeconomic drivers, segment volume and price growth, margin profiles, tax rates, and WACC. 2. **Revenue_Build**: Detailed build for Materials Group and Solutions Group, separating volume, price/mix, and foreign exchange impacts. 3. **Income_Statement**: Consolidated P&L from Net Sales down to Net Income and EPS, matching the 10-K format. 4. **Balance_Sheet**: Standard assets, liabilities, and shareholders' equity. 5. **Cash_Flow**: Operating, investing, and financing cash flows, ending with the change in cash. 6. **Debt_Schedule**: Tranche-by-tranche breakdown of senior notes, commercial paper, and calculated interest expense. 7. **Working_Capital**: Schedules for Accounts Receivable, Inventory, and Accounts Payable based on DSO, DIO, and DPO. 8. **PPE_and_Intangibles**: Capex additions, D&A waterfall, and goodwill tracking for recent acquisitions. 9. **DCF_Valuation**: Unlevered free cash flow calculation, discount rate application, terminal value, and implied share price. ## Key Financial Relationships 1. Materials Group Revenue = Prior Year Materials Group Revenue x (1 + Materials Volume Growth + Materials Price/Mix + FX Impact) 2. Solutions Group Revenue = Prior Year Solutions Group Revenue x (1 + Solutions Volume Growth + Solutions Price/Mix + FX Impact) 3. Consolidated Net Sales = Materials Group Revenue + Solutions Group Revenue 4. Materials Group Adjusted EBITDA = Materials Group Revenue x Materials Group Adjusted EBITDA Margin 5. Solutions Group Adjusted EBITDA = Solutions Group Revenue x Solutions Group Adjusted EBITDA Margin 6. COGS = Consolidated Net Sales x (1 - Consolidated Gross Margin %) 7. SG&A = Consolidated Net Sales x SG&A % of Revenue 8. Interest Expense = Average(Beginning Total Debt, Ending Total Debt) x Weighted Average Interest Rate 9. Free Cash Flow = Cash Flow from Operations - Capital Expenditures 10. Ending Shares Outstanding = Beginning Shares Outstanding - (Share Repurchase Spend / Average Share Price) + Stock-Based Compensation Dilution ## Cross-Sheet Dependencies - **Assumptions** feeds **Revenue_Build**, **Income_Statement**, **Working_Capital**, and **PPE_and_Intangibles**. - **Revenue_Build** feeds the top line of the **Income_Statement** and drives the activity levels in **Working_Capital**. - **Working_Capital** calculates the change in net working capital, which feeds the **Cash_Flow** statement and ending balances on the **Balance_Sheet**. - **PPE_and_Intangibles** calculates D&A, which feeds the **Income_Statement** (operating expenses) and **Cash_Flow** (non-cash add-back), while ending balances feed the **Balance_Sheet**. - **Debt_Schedule** feeds debt balances to the **Balance_Sheet** and interest expense to the **Income_Statement**. *Circularity warning:* Interest expense reduces Net Income, which reduces operating cash flow, which dictates the cash available for debt paydown or share repurchases, which in turn affects the debt balance and interest expense. - **Income_Statement** feeds Net Income to the top of the **Cash_Flow** statement and Retained Earnings on the **Balance_Sheet**. - **Cash_Flow** feeds the ending cash balance to the **Balance_Sheet**. ## Sign Convention - **Revenue and Income:** Positive. - **Expenses (COGS, SG&A, Interest):** Positive in their respective build schedules, but subtracted in the Income Statement formulas. - **Balance Sheet Assets:** Positive. - **Balance Sheet Liabilities and Equity:** Positive. - **Cash Flow:** Cash inflows are positive. Cash outflows (Capital Expenditures, Dividends Paid, Share Repurchases, Debt Repayment) are negative. ## Things Most Likely to Go Wrong - **Foreign currency translation:** Approximately 70% of sales are international. Failing to separate constant-currency organic growth from FX impacts will distort the underlying volume trends. - **Raw material pass-through distortion:** The Materials Group frequently adjusts prices to pass through raw material deflation or inflation. A drop in revenue might simply be deflation pass-through rather than a loss of market share. - **Restructuring charges:** Avery Dennison frequently takes restructuring charges (e.g., $48.8 million in 2025). Failing to separate these from core operating expenses will understate the company's adjusted operating margins. - **Segment margin mix shift:** The Solutions Group has lower operating margins (around 11%) than the Materials Group (around 15.6%), but it grows faster. A model that uses a flat consolidated margin will fail to capture the structural margin drag caused by this mix shift. - **M&A intangibles:** Bolt-on acquisitions like W.F. Taylor create lumpy amortisation of intangibles. The model must track Adjusted EPS (which excludes this amortisation) to align with management guidance and peer valuations. - **Circularity in share repurchases:** The company uses excess free cash flow to buy back shares. If the model dynamically links share repurchases to cash flow, it will create a circular reference with interest expense and debt balances. - **Pension accounting:** Fluctuations in pension mark-to-market costs can distort GAAP earnings. The model should focus on operating income excluding these non-cash pension adjustments. - **Seasonality in working capital:** Q3 is typically the strongest quarter for the Solutions Group due to apparel retail build-up. Annual models will smooth this out, but quarterly models must reflect the Q3 working capital build and Q4 cash release. ## Validation Checks - **Gross margin check:** Should remain in the 27% to 30% band based on historical performance; flag if outside this range. - **Operating margin check:** Consolidated operating margin should be 11% to 14%; flag if outside. - **Leverage check:** Net Debt / EBITDA should remain between 2.0x and 3.0x; flag if it exceeds 3.5x, which would threaten the investment-grade rating. - **Capex intensity check:** Capex as a % of revenue should run between 2.5% and 3.5%. - **Cash conversion check:** Operating Cash Flow / Net Income should be >1.1x due to high D&A and stable working capital. - **Balance sheet check:** Total Assets must equal Total Liabilities + Shareholders' Equity in every period. - **Tax rate check:** Effective tax rate should be 24% to 26%; flag if it drops below 20% without a modelled tax asset release. - **Dividend payout check:** Dividend payout ratio should remain between 35% and 45% of Net Income based on stated policy. ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Materials Group Volume Growth | 1.5 | % | Modest core volume growth in global packaging and labels | | Materials Group Price/Mix | -0.5 | % | Slight drag reflecting the pass-through of raw material deflation | | Solutions Group Growth | 6.0 | % | Driven by double-digit Intelligent Labels (RFID) growth offsetting slower base apparel | | Consolidated Gross Margin | 28.6 | % | Based on FY2025 actual reported performance | | R&D as % of Sales | 1.5 | % | Historical average required to maintain technology leadership | | SG&A as % of Sales | 15.0 | % | Historical average required to achieve target operating margins | | Effective Tax Rate | 25.0 | % | Blended global statutory tax rate | | Capex as % of Sales | 2.5 | % | Based on approximately $200M capex on $8.9B sales in 2025 | | Days Sales Outstanding (DSO) | 58 | Days | Historical average based on AR balances | | Days Inventory Outstanding (DIO) | 52 | Days | Historical average based on inventory balances | | Days Payable Outstanding (DPO) | 68 | Days | Historical average based on AP balances | | Dividend per Share (Annual) | 3.76 | $ | Based on $0.94 quarterly dividend declared in Q1 2026 | | Share Repurchases | 500 | $M | Consistent with the 2025 run-rate of approximately $572M | | Cost of Debt | 4.5 | % | Blended rate; recent €500M issuance was priced at 4.0% | | WACC | 8.5 | % | Standard discount rate for materials/packaging with moderate leverage | | Terminal Growth Rate | 2.0 | % | Proxy for long-term global GDP growth | ## Data Sources & Benchmarks - **SEC Filings:** Avery Dennison (AVY) 10-K, 10-Q, and 8-K filings via the SEC EDGAR database. - **Investor Relations:** Avery Dennison investor relations website for earnings presentations, the 2024 Investor Day deck, and non-GAAP reconciliations. - **Key Peers for Benchmarking:** UPM-Kymmene (UPM), CCL Industries (CCL.B), Amcor (AMCR), and Berry Global (BERY). - **Industry Data Sources:** IDTechEx for RFID market growth forecasts; global apparel retail sales data for Solutions Group end-market health. - **Consensus Estimates:** FactSet or Bloomberg for forward-looking EPS and revenue consensus to validate model outputs. ## Sources - Avery Dennison Q4 and Full Year 2025 Earnings Release (February 4, 2026) - Avery Dennison 2025 Form 10-K (Filed February 25, 2026) - Avery Dennison 2024 Investor Day Presentation (September 18, 2025) - SEC EDGAR Database - GuruFocus AVY Financial Metrics - StockTitan AVY SEC Filings Summary --- ## Frequently asked questions ### What does Avery Dennison do as a company? Avery Dennison is a global materials science and digital identification solutions company. It specializes in designing and manufacturing pressure-sensitive materials, as well as radio-frequency identification (RFID) inlays and tags, serving a wide range of industries. ### What are the main revenue drivers for Avery Dennison? Avery Dennison's revenue is primarily driven by its Materials Group, which constitutes approximately 69% of net sales, and its Solutions Group, contributing about 31%. Significant growth is also propelled by its high-growth Intelligent Labels (RFID) business, complementing its core materials segment. ### What are the key capital expenditure assumptions in Avery Dennison's financial model? The financial model assumes Avery Dennison's capital expenditure to be approximately 3.05% of revenue. This capex is roughly 60% growth-oriented, focusing on expanding Intelligent Labels manufacturing capacity and automating Materials Group facilities. ### What are the primary margin assumptions used in the Avery Dennison financial model? Key margin assumptions in the financial model include COGS at approximately 72.83% of revenue, SGA at about 15.15% of revenue, and R&D expenses at around 1.54% of revenue. These figures reflect the company's operational cost structure and efficiency. ### What is the main purpose of the Avery Dennison financial model? The Avery Dennison financial model is designed to evaluate the company's equity valuation and its capacity for generating cash flow. It specifically highlights the potential for margin expansion driven by the Intelligent Labels business and the resilient cash generation from its core Materials Group. ### Is an Excel financial model for Avery Dennison available for download? Yes, an Excel financial model for Avery Dennison is available for download. This model provides a comprehensive forecast horizon spanning from FY2026 to FY2030, enabling detailed analysis of the company's future financial performance. [Interactive forecast calculator](https://finamodel.com/companies/avery-dennison/forecast)