BWS Financial Inc

BWS provides independent stock specific research focused on companies with distinct value that are going through a special situation where there is a tangible catalyst not priced in. The catalyst can be anything from new product, restructuring, M&A, management change, change in business strategy, etc. BWS’s focus is to understand the change and evaluate the potential return for investors.

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VRS: Dragged Out Process Hides Real Value

Founder, BWS Financial Inc

Hamed Khorsand

Founder

Equity Bottom-Up

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Verso Corp. (VRS) continued to operate at a more efficient rate than we were forecasting, resulting in higher profitability and cash generation. Demand for coated paper remains ahead of supply allowing VRS to pass through price increases.</li></ul> <ul type="disc"><li>We were not expecting price increases to occur so late in the year since this the time when orders are fulfilled. The industry operating rate remains over 100 percent, which gives room to raise prices.</li></ul> <ul type="disc"><li>VRS’s stock is not trading at the levels we would have expected with the balance sheet’s ballooning cash balance and the Company on pace to exceed $200 million in adjusted EBITDA this year. At the closing price of $23.38, VRS is valued at 2.5 times our 2021 yearend EV to adjusted EBITDA multiple.</li></ul> <ul type="disc"><li>VRS has yet to realize the full benefits of all announced price increases. The timing lag should result in higher 2022 earnings.</li></ul>


Verso Corp. (VRS) continued to operate at a more efficient rate than we were forecasting, resulting in higher profitability and cash generation. Demand for coated paper remains ahead of supply allowing VRS to pass through price increases. We were not expecting price increases to occur so late in the year since this the time when orders are fulfilled. The industry operating rate remains over 100 percent, which gives room to raise prices. VRS’s stock is not trading at the levels we would have expected with the balance sheet’s ballooning cash balance and the Company on pace to exceed $200 million in adjusted EBITDA this year. At the closing price of $23.38, VRS is valued at 2.5 times our 2021 yearend EV to adjusted EBITDA multiple. VRS has yet to realize the full benefits of all announced price increases. The timing lag should result in higher 2022 earnings.

VRS: EV/EBITDA Now 2.5X, Raising PT to $35