Risk-on sentiment appears to be at all-time highs right now. Companies like Veritiv (NASDAQ:VRTV) are hot commodities right now. Investors seem to be particularly bullish on VRTV stock today after the company announced some pretty impressive earnings.
Let’s take a look at what this company does, and why it’s soaring today on earnings.
Packaging, Print and Facility Services Are Interesting?
Investors have piled into Veritiv, a relatively small-cap company with a market capitalization of around $400 million as of yesterday. Today, the company’s cap has grown to $550 million as investors have piled into this company on very strong earnings.
Veritiv’s a unique company in that its products and services are very pandemic-friendly. The company sells a range of cleaning materials for facilities, commercial print solutions and comprehensive packaging solutions, among other things.
It seems investors enamored with small-cap stocks are hand-picking those they think are undervalued today. Prior to earnings, Veritiv looked to be such a company. It appears this valuation bump was a long time coming for Veritiv. After this increase, the company’s price-earnings multiple sits at around 17 times earnings. That’s still decently priced, and suggests investors may be on to something.
Veritiv has a multi-year execution plan to drive broad-based efficiencies across the company. These strategic moves appear to be paying off.
Blowout Earnings Extremely Bullish for VRTV Stock
The fact that VRTV stock is up 40% at the time of writing on these earnings is not surprising. The company completely blew away expectations.
Year-over-year, Veritiv grew income before taxes to $43 million from a loss of $28.8 million last year. Net income followed suit, with $34.2 million last year versus a loss of $29.5 million in 2019. Revenue was down, but profitability was way up. These trends indicate Veritiv’s focus on improving efficiencies and the company’s cost structure are paying big dividends for investors.
Small-cap stocks have a tendency to lose a lot of money for quite a while. If Veritiv can keep this pace of profit growth alive, this is a company worth owning. Of course, sales matter too. However, investors in more traditional sectors such as paper and packaging may want to see earnings much more than revenue growth.
Earnings per share in 2020 of $2.14 price this stock at the $36 level at around 17 times earnings. This came as the company announced even higher restructuring charges in 2020 than the year prior.
The bottom line: There’s a lot to like about this stock right now, and VRTV stock may have much more room to run from here.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.