Veritiv (VRTV) short, mcap=$1.8bn, price $135 vs $131

VRTV short pitch:
– Veritiv is mostly a B2B distributor of print and packaging.
– Company has been benefiting from a temporary tight market due to both supply chain struggles and elevated demand during COVID allowing VRTV to opportunistically increase its pricing.
– Now, the market wrongly perceives that these elevated margins are sustainable.
– Cyclical packaging market began to loosen in Q3 2022 and the print market should follow suit.
– VRTV’s stock is expected to be under pressure as margins begin to normalize in 2023.

VRTV valuation:
– Veritiv is valued at E2023 net debt (to include cash from divestment) and 7.0x E2024 Adj. EBITDA.
– Discounted back this results in a $72/share price target.

Exp. gain: 47%

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