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Velocity Financial (VEL)
NYSE:VEL
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Velocity Financial
(NYSE:VEL)
68Neutral
Positive Factors
Earnings
Velocity Financial, Inc. reported fourth-quarter earnings with Core EPS well above consensus, showing financial strength.
Financial Position
Velocity Financial was able to raise $7.3M of new common equity capital through an at the market offering program, strengthening its financial position.
Loan Demand
Velocity is seeing strong loan demand as banks limit their lending activities.
Negative Factors
Credit Risk
Non-performing loans were 10.7% of the portfolio, up slightly from 10.64% last quarter.
Delinquency Risk
There is at least some risk if the delinquency pipeline grows further from here.
Market Position
The company is rated Underweight despite having a strong franchise in a fragmented lending market.
Velocity Financial (VEL) vs. S&P 500 (SPY)
Market Cap
$624.73M
Dividend YieldN/A
Average Volume (3M)128.69K
Price to Earnings (P/E)8.9
Beta (1Y)0.36
Revenue Growth32.62%
EPS Growth16.91%
CountryUS
Employees309
SectorFinancial
Sector Strength85
IndustryFinancial - Mortgages
Share Statistics
EPS (TTM)0.55
Shares Outstanding36,491,520
10 Day Avg. Volume86,666
30 Day Avg. Volume128,687
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.00
Price to Cash Flow (P/CF)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap9.39
Enterprise Value/RevenueN/A
Enterprise Value/Gross Profit27.71
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$21.75Price Target Upside28.39% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering4
Velocity Financial Business Overview & Revenue Model
Company DescriptionVelocity Financial, Inc. (VEL) is a financial services company that specializes in originating and managing investor loans secured by residential rental and small commercial properties. Operating primarily in the United States, the company focuses on providing tailored financing solutions to real estate investors and small business owners, catering to sectors that are often underserved by traditional banks. Velocity Financial's core services include offering fixed and adjustable-rate mortgage loans, as well as refinancing options, designed to meet the unique needs of its clients.
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 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
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
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.60
Cash Flow
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.―
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 211.74M | 131.72M | 93.08M | 75.88M | 65.97M | Gross Profit |
| 211.74M | 131.72M | 80.34M | 62.47M | 53.17M | EBIT |
| 101.40M | 76.85M | 171.97M | 39.79M | 23.13M | EBITDA |
| 0.00 | 0.00 | 22.23M | 0.00 | 0.00 | Net Income Common Stockholders |
| 68.42M | 52.27M | 32.21M | 29.22M | 17.78M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 49.90M | 40.57M | 3.32B | 36.13M | 13.27M | Total Assets |
| 5.53B | 4.40B | 3.75B | 2.81B | 2.10B | Total Debt |
| 4.86B | 3.84B | 3.28B | 2.38B | 1.73B | Net Debt |
| 4.81B | 3.80B | 3.23B | 2.34B | 1.72B | Total Liabilities |
| 5.01B | 3.97B | 3.37B | 2.47B | 1.88B | Stockholders Equity |
| 516.94M | 433.44M | 376.81M | 341.11M | 219.59M |
| Cash Flow | Free Cash Flow | |||
| 37.47M | 48.66M | 48.35M | 57.29M | 53.32M | Operating Cash Flow |
| 37.76M | 48.84M | 48.67M | 57.62M | 54.89M | Investing Cash Flow |
| -1.05B | -584.73M | -908.24M | -656.48M | 87.74M | Financing Cash Flow |
| 1.02B | 535.77M | 874.02M | 626.17M | -149.89M |
Velocity Financial Technical Analysis
Negative
16.94
Price Trends
18.33
Negative
18.74
Negative
19.04
Negative
Market Momentum
-0.23
Negative
35.60
Neutral
54.93
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For VEL, the sentiment is Negative. The current price of 16.94 is below the 20-day moving average (MA) of 17.43, below the 50-day MA of 18.33, and below the 200-day MA of 19.04, indicating a bearish trend. The MACD of -0.23 indicates Negative momentum. The RSI at 35.60 is Neutral, neither overbought nor oversold. The STOCH value of 54.93 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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 |
|---|---|---|---|---|---|---|---|
68 Neutral | $624.73M | 8.94 | 13.62% | ― | 32.62% | 16.91% | |
67 Neutral | $2.52B | 25.44 | 5.62% | 3.53% | 7.09% | 6.18% | |
64 Neutral | $12.61B | 9.79 | 7.95% | 16985.69% | 12.77% | -3.98% | |
61 Neutral | $5.07B | 15.06 | 9.32% | 1.12% | 23.79% | 121.61% | |
61 Neutral | $781.68M | 8.08 | 7.97% | 3.96% | 40.27% | ― | |
48 Neutral | $835.93M | ― | -16.34% | ― | 6.78% | 33.06% | |
48 Neutral | $377.52M | ― | -31.41% | ― | 3.76% | 16.19% |
* Financial Sector Average
Performance Comparison
VEL
Velocity Financial
16.94
-0.77
-4.35%
ECPG
Encore Capital
35.50
-7.47
-17.38%
WD
Walker & Dunlop
72.57
-21.41
-22.78%
PFSI
PennyMac Financial
97.63
6.56
7.20%
LDI
loanDepot
1.08
-1.20
-52.63%
GHLD
Guild Holdings
12.87
0.00
0.00%
Velocity Financial Earnings Call Summary
Earnings Call Date:May 01, 2025
(Q1-2025)
| % Change Since: -5.10%|
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 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.