Velocity Financial (VEL) AI Stock Analysis

• Market Cap: $606.12M
• Dividend Yield: N/A
• Average Volume (3M): 94.53K
• Price to Earnings (P/E): 8.6
• Beta (1Y): 0.39
• Revenue Growth: 32.62%
• EPS Growth: 16.91%
• Country: US
• Employees: 309
• Sector: Financial
• Sector Strength: 64
• Industry: Financial - Mortgages
• EPS (TTM): 0.73
• Shares Outstanding: 36,491,520
• 10 Day Avg. Volume: 63,888
• 30 Day Avg. Volume: 94,527
• PEG Ratio: N/A
• Price to Book (P/B): 0.00
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 9.68
• Enterprise Value/Revenue: 14.65
• Enterprise Value/Gross Profit: 20.09
• Enterprise Value/Ebitda: 25.30
• 1Y Price Target: $22.00
• Price Target Upside: 32.21% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 2

• Rating: 68 Neutral
• 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

Equity Capital

Velocity Financial was able to raise $7.3M of new common equity capital through an at the market offering program, strengthening its financial position.

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.

Market Rating

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

Tariff Impact

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

Velocity Financial Business Overview & Revenue Model

Company Description

Velocity 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 Money

Velocity 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.

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	94.33M	75.31M	69.95M
Gross Profit	211.74M	131.72M	80.34M	61.91M	57.16M
EBITDA	0.00	0.00	0.00	0.00	0.00
Net Income	68.42M	52.27M	32.21M	29.22M	17.78M
Balance Sheet
Total Assets	5.53B	4.40B	3.75B	2.81B	2.10B
Cash, Cash Equivalents and Short-Term Investments	49.90M	40.57M	45.25M	36.13M	13.27M
Total Debt	4.86B	3.84B	3.28B	2.38B	1.73B
Total Liabilities	5.01B	3.97B	3.37B	2.47B	1.89B
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

• Technical Analysis Sentiment: Negative
• Last Price: 16.64
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: 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 16.64 is below the 20-day moving average (MA) of 17.48, below the 50-day MA of 17.81, and below the 200-day MA of 18.58, indicating a bearish trend. The MACD of -0.41 indicates Positive momentum. The RSI at 33.50 is Neutral, neither overbought nor oversold. The STOCH value of 20.09 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for VEL.

Velocity Financial Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
VEL	68 Neutral	$606.12M	8.62	13.62%	―	32.62%	16.91%
PFSI	64 Neutral	$5.13B	13.76	10.05%	1.25%	20.77%	96.22%
WD	59 Neutral	$2.59B	26.11	5.62%	3.55%	6.68%	6.08%
Sector *	58 Neutral	HK$95.83B	5.46	-3.98%	4.95%	3.41%	-44.65%
GHLD	57 Neutral	$1.24B	28.61	3.71%	2.52%	42.92%	64.72%
ECPG	52 Neutral	$855.51M	―	-13.05%	―	13.17%	43.16%
LDI	48 Neutral	$633.43M	―	-29.48%	―	3.76%	16.19%

Velocity Financial Corporate Events

Velocity Financial Releases Q1 2025 Earnings Presentation

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.