Is Avery Dennison's (NYSE:AVY) Share Price Gain Of 115% Well Earned?

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, you can make far more than 100% on a really good stock. Long term Avery Dennison Corporation (NYSE:AVY) shareholders would be well aware of this, since the stock is up 115% in five years. It's also good to see the share price up 21% over the last quarter. But this could be related to the strong market, which is up 8.9% in the last three months.

Check out our latest analysis for Avery Dennison

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over half a decade, Avery Dennison managed to grow its earnings per share at 17% a year. This EPS growth is remarkably close to the 17% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. In fact, the share price seems to largely reflect the EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Avery Dennison has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Avery Dennison will grow revenue in the future.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Avery Dennison the TSR over the last 5 years was 141%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Avery Dennison shareholders gained a total return of 0.6% during the year. Unfortunately this falls short of the market return. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 19% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

Of course Avery Dennison may not be the best stock to buy. So you may wish to see this freecollection of growth stocks.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.