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Investing in stocks comes with the risk that the share price will fall. Unfortunately, shareholders of Veritiv Corporation (NYSE:VRTV) have suffered share price declines over the last year. In that relatively short period, the share price has plunged 54%. To make matters worse, the returns over three years have also been really disappointing (the share price is 53% lower than three years ago). Shareholders have had an even rougher run lately, with the share price down 34% in the last 90 days.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the unfortunate twelve months during which the Veritiv share price fell, it actually saw its earnings per share (EPS) improve by 2.0%. It’s quite possible that growth expectations may have been unreasonable in the past. Extraordinary items have impacted profits over the last twelve months. By glancing at these numbers, we’d posit that the the market had expectations of much higher growth, last year. But looking to other metrics might better explain the share price change.
Revenue was fairly steady year on year, which isn’t usually such a bad thing. But the share price might be lower because the market expected a meaningful improvement, and got none.
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Veritiv will earn in the future (free profit forecasts).
A Different Perspective
Investors in Veritiv had a tough year, with a total loss of 54%, against a market gain of about 9.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 13% over the last half decade. We realise that Buffett has said investors should ‘buy when there is blood on the streets’, but we caution that investors should first be sure they are buying a high quality businesses. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Veritiv by clicking this link.
Veritiv is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.