Yahoo Finance Here's Why Veritiv (NYSE:VRTV) Has Caught The Eye Of Investors
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Veritiv (NYSE:VRTV). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
Check out our latest analysis for Veritiv
Veritiv's Improving Profits
Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. Which is why EPS growth is looked upon so favourably. Commendations have to be given in seeing that Veritiv grew its EPS from US$3.52 to US$13.43, in one short year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. This could point to the business hitting a point of inflection.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Veritiv achieved similar EBIT margins to last year, revenue grew by a solid 15% to US$7.1b. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Veritiv's balance sheet strength, before getting too excited.
Are Veritiv Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
First things first, there weren't any reports of insiders selling shares in Veritiv in the last 12 months. But the really good news is that Independent Chairman Stephen Macadam spent US$392k buying stock, at an average price of around US$127. Purchases like this can offer an insight into the faith of the company's management - and it seems to be all positive.
The good news, alongside the insider buying, for Veritiv bulls is that insiders (collectively) have a meaningful investment in the stock. Holding US$75m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This would indicate that the goals of shareholders and management are one and the same.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Sal Abbate is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalisations between US$1.0b and US$3.2b, like Veritiv, the median CEO pay is around US$5.6m.
Veritiv's CEO took home a total compensation package worth US$5.0m in the year leading up to December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Does Veritiv Deserve A Spot On Your Watchlist?
Veritiv's earnings have taken off in quite an impressive fashion. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Veritiv belongs near the top of your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for Veritiv you should be aware of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Veritiv, you'll probably love this free list of growing companies that insiders are buying.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
