Should You Be Adding Veritiv (NYSE:VRTV) To Your Watchlist Today?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Veritiv (NYSE:VRTV). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Veritiv with the means to add long-term value to shareholders.

See our latest analysis for Veritiv

How Fast Is Veritiv Growing Its Earnings Per Share?

Over the last three years, Veritiv has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Veritiv's EPS shot from US$13.51 to US$24.22, over the last year. Year on year growth of 79% is certainly a sight to behold.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Unfortunately, Veritiv's revenue dropped 4.9% last year, but the silver lining is that EBIT margins improved from 3.9% to 6.3%. While not disastrous, these figures could be better.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

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?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Veritiv followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Given insiders own a significant chunk of shares, currently valued at US$73m, they have plenty of motivation to push the business to succeed. This would indicate that the goals of shareholders and management are one and the same.

Is Veritiv Worth Keeping An Eye On?

Veritiv's earnings have taken off in quite an impressive fashion. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Veritiv very closely. We don't want to rain on the parade too much, but we did also find 2 warning signs for Veritiv (1 is concerning!) that you need to be mindful of.

Although Veritiv certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.