Pat McKeough responds to many requests from members of his Inner Circle for specific tips on investing in stocks as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week we offer you a report on one of the stocks profiled in these Q&A sessions. We give you Pat’s buy-hold-sell recommendation as well as his analysis of the stock. This is part of the specific buy, hold and sell advice we offer you in our daily posts. Every week you get “A Stock to Sell” on Monday, “Best Canadian Stocks” on Tuesday, and “U.S. Stock Picks” on Thursday.

This week we received a question from an Inner Circle Member about one of Canada’s leading packaging firms. CCL Industries makes 83% of its revenue from pressure-sensitive labels, and the U.S. and Europe supply 73% of its overall revenue. The company grows by acquisition and bought three companies in 2014 alone. Pat balances CCL’s ability to build market share with its size and technology against the risk of growth by acquisition and exposure to volatile commodity prices.

Q: Pat: Do you have any comments on CCL Industries as an investment? Thanks.

A: CCL Industries (symbol CCL.B on Toronto; www.cclind.com) makes packaging products for the food, health care, automotive and personal care industries. Major customers include Procter & Gamble and Johnson & Johnson.

The company gets 83% of its revenue by making pressure-sensitive labels for plastic bottles and other forms of packaging.

CCL also makes aluminum aerosol cans and beverage bottles (12% of revenue) and flexible plastic tubes (5%).

The U.S. supplies 45% of the company’s revenue, followed by Europe (29%), Asia (10%), Mexico and Brazil (9%) and Canada (7%).

The company has a long history of expanding through acquisitions. In July 2013, it paid $486.7 million U.S. for the office and consumer products division of Avery Dennison Corp., symbol AVY on New York. This business makes labels, binders, dividers, sheet protectors and writing instruments under the Avery brand.

Three acquisitions in 2014 help boost CCL revenues

In February 2014, CCL acquired two private companies that make labels and plastic tubes at three plants in New Jersey and Ohio. It paid $72.9 million for these businesses.

In September 2014, CCL paid $18.3 million for Bandfix AG, a Switzerland-based firm that makes labels for European food and cosmetic manufacturers.

Thanks to these new businesses and the positive impact of the low Canadian dollar, CCL’s revenue rose 13.7% in the three months ended September 30, 2014, to $689.7 million from $606.6 million a year earlier. Excluding one-time items, earnings per share gained 32.6%, to $1.83 from $1.38.

CCL ended the quarter with long-term debt of $650.9 million, which is a low 15% of its market cap. Due to its recent acquisitions, goodwill and other intangible assets now total $772.8 million, or a somewhat high 18% of CCL’s market cap. The company also held cash of $216.0 million, or $6.22 a share.

The stock has jumped 52% in the past year and now trades at 17.9 times the $6.99 a share that CCL will probably earn in 2014. The $1.20 dividend yields 1.0%.

The company’s exposure to volatile commodity prices—including for oil and aluminum—and fluctuating currencies adds risk, as does its growth by acquisition. However, it should be able to keep using its size, scale and technology to build market share.

We view CCL Industries as a hold.