• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

This Stock Is Up 600% in 2021 -- And It's Still Cheap

You can find investment ideas in the strangest places.
By JIM COLLINS
Nov 19, 2021 | 11:30 AM EST
Stocks quotes in this article: VRTV, IP

Sometimes I find investment ideas in the strangest of places. Even Yahoo Finance.

This morning, while researching some energy ideas, I was somehow directed to a Yahoo FInance interview with the CEO of Veritiv (VRTV) , Sal Abbate. Despite listing an incorrect ticker (Veritiv is VRTV, not VRT) and having to scroll down past an embedded ad attempting to get me to click-through to a story that stated Nick Cannon is one of the richest heirs on the world (this can't possibly be true, although I did enjoy his performanceein Drumline) I decided to read the piece and do the work on Veritiv.

First step in my process is -- as it should be for everyone -- to look at the stock chart. In the case of VRTV, that image almost melted my laptop screen. Veritiv shares have risen a mere 592.6% in 2021. Not a typo. So, what is Veritiv? Formed in 2014 after a spin-out from International Paper (IP) , Veritiv is, as described on its website:

a full-service provider of packaging, JanSan and hygiene products, services and solutions. Additionally, Veritiv provides print and publishing products, and logistics and supply chain management solutions.

Wow! I don't see any references to electric cars anywhere in that passage. Ha! Seriously, though, I thought Abbate made three salient points in the Yahoo article, well-written despite the errors I mentioned earlier.

  1. Unprecedented demand. Abbate noted record demand across VRTV's businesses from packaging to its print business, which he noted had been in secular decline.
  2. Raw material shortages. Abbate noted escalating prices in resin-based products, especially corrugated paper.
  3. Labor shortages. Abbate alluded to a "war on talent" and noted that Veritiv is now offering sign-on bonuses and raising the ante on employee compensation in general.

So, that was a helpful interview, but I like to run the numbers myself.

VRTV's third-quarter results, released on Nov. 3, reflected a hotness in growth that I thought would make my Internet filter block the page as I tried to load the results.

Veritiv sales rose 11.1% year-on year in Q3 and the bottom line greatly benefited, characteristic of a business that has substantial fixed costs and uses conservative accounting. So, on that 11% sales growth, adjusted EBITDA rose 81.8% YoY to $93.7 million, and net income rose a cool 89.6% and diluted EPS rose at an even faster pace, 95.3% YoY, as VRTV had been buying back shares before the recent massive jump in VRTV share price. Also, crucially, VRTV management raised guidance for EPS, free cash flow and adjusted EBITDA for 2021.

These numbers are characteristic of a company that is in the midst of stratospheric growth. Yes, in a typical, industrial business like paper and packaging, 11.1% top-line growth IS stratospheric, and the bottom-line expansion shows the massive operating leverage that Veritiv has.

So, the question is: do you still buy it after a 600% move in a year? Or should an investor simply throw up her hands and say "darn it...missed that one."

Well, based on trailing figures, VRTV's $2.1 billion current market cap represents less than 0.5x trailing 12-months sales. and would be much less, closer to 0.25x sales, if one simply annualized the third quarter's sales rate of $1.787 billion. Also, at Thursday's closing price of $143.56 and the midpoint of management's guidance range of $8.00-$9.00 for EPS in 2021, VRTV trades at 16.9x this year's earnings. Take a look at Nasdaq names if you think that is expensive. It's not.

So, a stock that has risen 600% in a year can still be considered cheap. As I always say, it's a great big world out there. Just be careful you aren't missing great investment ideas that are right under your nose.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Collins had no positions in any securities mentioned.

TAGS: Fundamental Analysis | Investing | Markets | Stocks | Trading | Value Investing | U.S. Equity

More from Stocks

Fear Fades as a Reason to Rally

James "Rev Shark" DePorre
May 16, 2022 4:20 PM EDT

Monday turns uninspiring as traders lack incentive to buy and oil moves higher amid poor economic data.

Occidental Petroleum Continues to Target Higher Prices

Bruce Kamich
May 16, 2022 2:52 PM EDT

Here's our first price target and our long term objective.

Supply and Demand Are Critical, but Remember: Timing Is Still Everything

Maleeha Bengali
May 16, 2022 1:51 PM EDT

Econ 101 suggests that at some point, either the supply side catches up, or demand falls to get prices back in equilibrium. Let's see what this means for oil -- and a potential recession.

How Is JetBlue's Stock Affected by Its Hostile Bid for Spirit?

Bruce Kamich
May 16, 2022 1:08 PM EDT

Let's review the charts and indicators.

Da or Nyet on McDonald's as It Exits Russia?

Bruce Kamich
May 16, 2022 12:15 PM EDT

Let's check out the charts to see the best course of action for investors.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 07:14 PM EDT PAUL PRICE

    A New, Very Scary Movie

  • 08:51 AM EDT PAUL PRICE

    Advice From the Future...

  • 12:20 PM EDT PAUL PRICE

    A Blast From the Past Regarding Bitcoin

  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login