Businesses around the world will continue to demand considerable volumes of commercial and office supplies, at least in the foreseeable future. Avery Dennison Corp (NYSE:AVY), Canon Inc. (ADR) (NYSE:CAJ), and Xerox Corporation (NYSE:XRX) are three industry leading companies particularly poised to benefit from the recuperating economy and the resulting increase in demand for business supplies worldwide. Let’s take a closer look at them in order to check if they stand as good long-term investments.
Avery Dennison: Not so pressure-sensitive
Avery Dennison Corp (NYSE:AVY) produces and distributes pressure-sensitive adhesives and materials and other related office and commercial products, like tags and labels, in more than 60 countries. Recently, the company has been undergoing a wide restructuring that is expected to deliver annualized savings of more than $100 million by mid-fiscal-year. Given the opportunities created by this reorganization, analysts expect the firm to deliver an average annual EPS growth rate of around 14% for the next five years. Poised to outperform its peers and having beat estimates last quarter, is this stock a buy?
Management’s long-standing efforts to build a strong brand name and important operations in emerging markets have proven highly profitable in the past. Currently, these markets account for about a third of Avery Dennison Corp (NYSE:AVY)’s Pressure Sensitive Materials (PSM) segment’s revenue and for one-fourth of its Retail Branding and Information Solutions (RBIS) segment’s sales. Going forward, emerging economies should drive growth and contribute to margins in the long-term while helping the firm weather the weakness in developed countries.
Strongly committed with its long-run targets, which include an EPS growth in the 15%-20% range by 2015, management agreed to divest some of its struggling segments and put a strong focus on productivity improvements. Although an attractive investment opportunity, the stock trades at 22.8 times its earnings, surpassing the industry average valuation by 47%. So, you will have to pay a premium if you want to hold this stock.
A Canon in the imaging sector
Canon Inc. (ADR) (NYSE:CAJ) is a worldwide leading company in the professional and consumer imaging equipment and information systems industries. With a wide product portfolio, strong international presence, and an established brand name, this is a firm you will want to watch. Expected to deliver annual EPS growth rates above 18% in average over the next five years, this is a stock to buy. Trading at 13 times consensus earnings, about a 35% discount to its peers, now looks like a good time to acquire a portion of this company.