Avery Dennison Outlook - Weak Technicals, Mixed Analysts, and Divergent Money Flows

1. Market Snapshot: Bearish Signals Dominate

The technical outlook for Avery Dennison (AVY) is weak, with internal diagnostic scores of 2.69 out of 10, suggesting a bearish tilt. Three bearish indicators have emerged against zero bullish ones, signaling a high risk of further declines. The stock has dropped by 0.34% recently, aligning with the negative sentiment.

2. News Highlights: Mixed Signals from Sectors

• EPE USA leads sustainable packaging innovation: In an environment increasingly focused on eco-friendly practices, EPE USA announced new efforts to develop reusable and recyclable materials. While this isn’t directly tied to Avery Dennison, it highlights a broader trend that Avery Dennison might need to address in its own offerings.
• Ohio Public Employees' Retirement System cuts stake in Packaging Co. of America: Institutional investors are reevaluating their positions in the packaging sector, and this move suggests caution. Avery Dennison, being in a similar space, may face pressure from investors to justify its value proposition.
• China's factory activity contracts: Global demand, particularly in manufacturing and packaging, may face headwinds as China’s PMI dipped slightly to 49.5 in May. This could affect Avery Dennison’s international operations, given its exposure to global supply chains.

3. Analyst Views & Fundamentals: Mixed Ratings, Weak Growth

Analysts are divided in their outlook for Avery Dennison. The simple average rating across five institutions is 3.80, while the performance-weighted rating is 2.43, indicating poor historical accuracy for most firms. The ratings are split between “Strong Buy,” “Buy,” and “Neutral,” suggesting no strong consensus.

This divergence contrasts with the current price trend, which has seen a 0.34% drop. The bearish technical outlook seems to be more aligned with market sentiment than the ratings themselves.

Key Fundamental Indicators:

• Operating Cycle: 121.77 days (internal diagnostic score: 0) – This is a red flag; it takes over 121 days for Avery Dennison to turn its inventory into cash, which is far below the industry average for healthy operations.
• Total Operating Revenue (YoY Growth Rate): -0.41% (internal diagnostic score: 3) – Revenue is actually declining year-over-year, which is a clear warning sign of weakening demand or market share erosion.
• Net Cash Flow from Operating Activities (YoY Growth Rate): -39.37% (internal diagnostic score: 1) – Operating cash flow has dropped significantly, pointing to potential liquidity or operational efficiency issues.
• PE Ratio: 82.62 (internal diagnostic score: 1) – The stock is highly overvalued on a price-to-earnings basis, raising questions about its sustainability and investor enthusiasm.
• Net Income-to-Revenue: -17.77% (internal diagnostic score: 2) – The firm is operating at a loss in relation to its revenue, a major negative for long-term viability.

4. Money-Flow Trends: Retail Optimism vs. Institutional Caution

Large and institutional investors are cautious, with negative fund-flow trends for medium, large, and extra-large flows. The block trend is also bearish, with 47.5% of large-cap capital flowing out. However, retail investors are showing a positive bias, with 50.2% inflow ratio for small investors. This divergence suggests retail optimism may be short-lived in the face of institutional sell-offs.

Overall, the fund-flow score is 7.86 (internal diagnostic score, good), indicating strong inflows from the retail segment, though this does not outweigh the bearish signals from larger players.

5. Key Technical Signals: Bearish Engulfing and Oversold Conditions

The technical picture for Avery Dennison is dominated by three bearish indicators over the last five days, with no bullish signs:

• WR Oversold – internal diagnostic score: 3.15 – This suggests the stock may be oversold, but the neutral-to-bullish evaluation is weak. Historical signals show a 50.77% win rate, with an average return of 7.00%.
• Bullish Engulfing – internal diagnostic score: 2.58 – Despite its name, this pattern has a 44.44% win rate and a -56.00% average return, making it a misleading signal.
• Bearish Engulfing – internal diagnostic score: 2.35 – The strongest bearish signal, with a 41.67% win rate and 0.00% average return, reinforcing the downtrend.

Recent chart patterns, as of September 16, 2025, include a Bullish Engulfing pattern, which is misleading given the bearish context. A WR Oversold signal appeared on September 15 and 12, but without follow-through buying, it remains weak.

Key technical insight: Bearish signals are clearly dominant, with 3 bearish vs. 0 bullish indicators over the last 5 days. The overall trend remains weak and suggests investors should avoid entering new positions.

6. Conclusion: Consider Waiting for a Pull-Back or Stronger Fundamentals

Given the weak technicals, divergent analyst ratings, and mixed money-flow trends, now may not be the best time to take a long position in Avery Dennison. While retail investors are optimistic, the broader institutional sentiment and deteriorating fundamentals point to caution.

Investor takeaway: Consider waiting for a pull-back or stronger earnings and operational improvement before making a move. The stock is currently overvalued and underperforming in both price and fundamentals, with key metrics like operating cycle and cash flow growth trending negatively.