Velocity Financial (VEL) AI Stock Analysis

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Velocity Financial

(NYSE:VEL)

Rating:68Neutral

Price Target:―

Velocity Financial exhibits robust financial performance, with strong loan origination growth and improved profitability. Despite some technical weakness and challenges in revenue reporting, the company's positive earnings call and attractive valuation indicate potential for future growth. Continued focus on revenue sustainability and debt management will be important factors for long-term success.

Positive Factors

Business Growth

The company's loan portfolio increased by 6.4% to a total of $5.1B, indicating growth in business operations.

Financial Performance

Velocity Financial, Inc. reported fourth-quarter earnings with Core EPS well above consensus, showing financial strength.

Loan Demand

Velocity is seeing strong loan demand as banks limit their lending activities.

Negative Factors

Credit Quality

Non-performing loans were 10.7% of the portfolio, up slightly from 10.64% last quarter.

Economic Uncertainty

The longer-term earnings impact connected to tariffs could be mixed, considering the headline uncertainty it puts on macro conditions and consumer spending.

Market Position

The company is rated Underweight despite having a strong franchise in a fragmented lending market.

Velocity Financial (VEL) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$624.01M

Dividend YieldN/A

Average Volume (3M)147.24K

Price to Earnings (P/E)8.9

Beta (1Y)0.36

Revenue Growth32.62%

EPS Growth16.91%

CountryUS

Employees309

SectorFinancial

Sector Strength82

IndustryFinancial - Mortgages

Share Statistics

EPS (TTM)0.55

Shares Outstanding36,491,520

10 Day Avg. Volume194,989

30 Day Avg. Volume147,243

Financial Highlights & Ratios

PEG Ratio5.59

Price to Book (P/B)1.00

Price to Sales (P/S)0.00

P/FCF Ratio20.08

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$23.00

Price Target Upside34.50% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering2

Velocity Financial Business Overview & Revenue Model

Company DescriptionVelocity Financial, Inc. operates as a real estate finance company in the United States. It primarily originates and manages investor loans secured by 14 unit residential rental and small commercial properties. The company offers its products through a network of independent mortgage brokers. Velocity Financial, Inc. was founded in 2004 and is headquartered in Westlake Village, California.

How the Company Makes MoneyVelocity Financial primarily makes money through the interest income generated from its loan portfolio. The company extends loans to real estate investors and small business owners, earning interest over the life of these loans. Additionally, Velocity Financial generates revenue through loan origination fees, which are charges for processing new loan applications. The company also benefits from the sale of loans in the secondary market, where it can earn gains on the sale of loans it has originated. Strategic partnerships with real estate investment firms and financial institutions further enhance its ability to underwrite and service a diverse range of real estate transactions, contributing to its overall earnings.

Velocity Financial Earnings Call Summary

Earnings Call Date:May 01, 2025

(Q1-2025)

% Change Since: -4.20%|

Next Earnings Date:Jul 31, 2025

Earnings Call Sentiment Positive

The earnings call presented a strong performance with significant growth in loan originations and net revenue, successful capital market activities, and stable core earnings. However, there were slight challenges with a decrease in portfolio yield and increased cost of funds. Overall, the positive aspects notably outweighed the negatives.

Q1-2025 Updates

Positive Updates

Significant Increase in Loan Originations

Velocity Financial originated $640 million in new loans, a 69% increase compared to the prior year, and set a record for a single quarter's production.

Strong Net Revenue Growth

Net revenue increased by 27%, driven by increased loan originations and disciplined credit standards.

Successful Capital Market Activities

Velocity Financial completed four debt transactions, issued three securitizations, and sold new shares through the ATM program.

Consistent Core Earnings

Core earnings increased to $0.55 per share, up from $0.51 a year ago, marking the company's second-best quarterly earnings.

Stable Nonperforming Loan Rate

The nonperforming loan rate remained stable at 10.8%, with positive resolutions and a resolution gain of 102.4% above par.

Negative Updates

Slight Decrease in Portfolio Yield

The portfolio yield for Q1 decreased by 23 basis points quarter-over-quarter due to high cash nonperforming loan interest received in Q4.

Increased Cost of Funds

The cost of funds increased by 30 basis points year-over-year, affecting net interest margins.

CECL Reserve Slightly Above Normal Range

The CECL loan loss reserve increased to 22 basis points, slightly above the normal range due to a severe macroeconomic forecast.

Company Guidance

In the first quarter of 2025, Velocity Financial, Inc. achieved significant growth, originating $640 million in new loans, marking a 69% increase compared to the previous year. This expansion contributed to a 27% rise in net revenue and a 17% increase in core pretax earnings. The company reported core earnings of $0.55 per share, slightly below the record set in Q4 2024. Its portfolio increased by 27%, with nonperforming loans stable at 10.8%. The company completed four debt transactions, issued three securitizations, and sold 1.6 million common shares, enhancing liquidity and capital structure. Velocity's net interest margin (NIM) was 3.35%, reflecting a more normalized level, and the company's total liquidity stood at $75.6 million. Despite market volatility, Velocity remains optimistic about its growth trajectory, with a robust loan pipeline and strong investor demand in the capital markets.

Velocity Financial Financial Statement Overview

Summary

Velocity Financial has demonstrated strong financial growth, with notable improvements in net income and EBIT margins. However, the absence of total revenue data for 2024 and historical high debt levels raise concerns. The company has effectively strengthened its equity position and cash flow management, but continued focus on revenue generation and debt management is crucial for maintaining stability.

Income Statement

Positive

Velocity Financial has shown consistent revenue growth over the years, with a notable increase in EBIT margin from 17.05% in 2020 to 77% in 2023. However, the absence of TTM data for 2024 makes it challenging to assess the most recent performance. The net profit margin has also improved from 26.95% in 2020 to 51.94% in 2023, indicating strong profitability. Despite these strengths, the lack of reported gross profit margin and zero total revenue in 2024 raises concerns about revenue sustainability.

Balance Sheet

Neutral

The company's balance sheet reflects an improving equity position, with stockholders' equity growing from $219.59M in 2020 to $516.94M in 2024. The equity ratio improved from 10.44% in 2020 to 9.35% in 2023, indicating a stable capital structure. However, the total debt to equity ratio was high in previous years, which could pose financial risks if not managed properly. The significant reduction in total debt by 2024 is a positive sign, but the absence of total debt data for 2024 complicates full assessment.

Cash Flow

Positive

Velocity Financial's cash flow statements indicate a positive trend, with free cash flow growth and consistent operating cash flow. The free cash flow to net income ratio improved significantly in 2024, reflecting efficient cash management. However, a sharp decline in operating cash flow from 2020 to 2024 suggests possible challenges in generating cash from operations. Despite these fluctuations, the company effectively managed its financing activities to support growth.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
400.50M	211.74M	131.72M	93.08M	75.88M	65.97M
	Gross Profit
292.09M	211.74M	131.72M	80.34M	62.47M	53.17M
	EBIT
208.72M	101.40M	76.85M	171.97M	39.79M	23.13M
	EBITDA
231.92M	0.00	0.00	22.23M	0.00	0.00
	Net Income Common Stockholders
69.58M	68.42M	52.27M	32.21M	29.22M	17.78M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
39.40M	49.90M	40.57M	3.32B	36.13M	13.27M
	Total Assets
3.84B	5.53B	4.40B	3.75B	2.81B	2.10B
	Total Debt
3.36B	4.86B	3.84B	3.28B	2.38B	1.73B
	Net Debt
3.32B	4.81B	3.80B	3.23B	2.34B	1.72B
	Total Liabilities
3.45B	5.01B	3.97B	3.37B	2.47B	1.88B
	Stockholders Equity
387.62M	516.94M	433.44M	376.81M	341.11M	219.59M
Cash Flow		Free Cash Flow
30.38M	37.47M	48.66M	48.35M	57.29M	53.32M
	Operating Cash Flow
30.71M	37.76M	48.84M	48.67M	57.62M	54.89M
	Investing Cash Flow
-1.23B	-1.05B	-584.73M	-908.24M	-656.48M	87.74M
	Financing Cash Flow
1.22B	1.02B	535.77M	874.02M	626.17M	-149.89M

Velocity Financial Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price17.10

Price Trends

50DMA

17.22

Negative

100DMA

18.02

Negative

200DMA

18.81

Negative

Market Momentum

MACD

-0.10

Negative

RSI

55.49

Neutral

STOCH

79.73

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For VEL, the sentiment is Neutral. The current price of 17.1 is above the 20-day moving average (MA) of 16.63, below the 50-day MA of 17.22, and below the 200-day MA of 18.81, indicating a neutral trend. The MACD of -0.10 indicates Negative momentum. The RSI at 55.49 is Neutral, neither overbought nor oversold. The STOCH value of 79.73 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for VEL.

Velocity Financial Risk Analysis

Velocity Financial disclosed 60 risk factors in its most recent earnings report. Velocity Financial reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Velocity Financial Peers Comparison

Overall Rating

UnderperformOutperform

Sector (64)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
VEL	68 Neutral	$624.01M	8.93	13.62%	―	32.62%	16.91%
Sector *	64 Neutral	$12.87B	9.81	7.76%	16985.65%	12.28%	-7.83%
ECPG	63 Neutral	$896.84M	―	-13.05%	―	13.17%	43.16%
PFSI	62 Neutral	$4.94B	14.68	9.32%	1.25%	23.79%	121.61%
GHLD	57 Neutral	$880.90M	20.39	3.71%	3.53%	42.92%	64.72%
WD	49 Neutral	$2.32B	23.43	5.62%	3.86%	6.68%	6.08%
LDI	48 Neutral	$428.88M	―	-29.48%	―	3.76%	16.19%

* Financial Sector Average

Performance Comparison

VEL

Velocity Financial

17.10

-1.13

-6.20%

ECPG

Encore Capital

38.41

-3.17

-7.62%

Walker & Dunlop

68.33

-21.19

-23.67%

PFSI

PennyMac Financial

95.69

7.76

8.83%

LDI

loanDepot

1.30

-0.68

-34.34%

GHLD

Guild Holdings

14.16

0.21

1.51%

Velocity Financial Corporate Events

Financial Disclosures

Velocity Financial Releases Q1 2025 Earnings Presentation

Neutral

May 2, 2025

Velocity Financial has released its first quarter 2025 earnings presentation on its Investor Relations website. The information provided is intended for furnishing purposes and is not deemed filed under the Securities Exchange Act, nor incorporated into other filings unless specifically referenced.

Spark’s Take on VEL Stock

According to Spark, TipRanks’ AI Analyst, VEL is a Neutral.

Velocity Financial’s stock score reflects a blend of strong financial performance and attractive valuation, tempered by bearish technical indicators. The earnings call highlighted robust growth and a positive outlook, yet concerns over non-performing loans and zero revenue reporting in 2024 weigh on the overall assessment. Continued focus on revenue generation and debt management will be critical for future stability.

To see Spark’s full report on VEL stock, click here.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.