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Velocity Financial (VEL)
NYSE:VEL
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Velocity Financial
(NYSE:VEL)
67Neutral
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 Strength
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
Loan Portfolio
Non-performing loans were 10.7% of the portfolio, up slightly from 10.64% last quarter.
Market Competition
Ordinarily we'd expect the availability of 20%+ returns to motivate more competition, although higher interest rates over the last three years have hollowed the space.
Risk of Delinquencies
We see at least some risk if the delinquency pipeline grows further from here.
Velocity Financial (VEL) vs. S&P 500 (SPY)
Market Cap
$630.99M
Dividend YieldN/A
Average Volume (3M)123.58K
Price to Earnings (P/E)9.9
Beta (1Y)0.54
Revenue Growth31.74%
EPS Growth29.41%
CountryUS
Employees309
SectorFinancial
Sector Strength82
IndustryFinancial - Mortgages
Share Statistics
EPS (TTM)1.89
Shares Outstanding34,015,490
10 Day Avg. Volume221,119
30 Day Avg. Volume123,584
Financial Highlights & Ratios
PEG Ratio0.34
Price to Book (P/B)N/A
Price to Sales (P/S)5.10
Price to Cash Flow (P/CF)4.80
P/FCF Ratio2.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$21.75Price Target Upside17.25% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering4
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 Financial Statement Overview
Summary
Velocity Financial demonstrates robust financial growth and profitability, notably with improvements in net income and EBIT margins. Despite concerns about zero revenue reporting in 2024 and historical debt levels, the company has effectively strengthened its equity position and cash flow management. Continued focus on revenue generation and debt management will be crucial for sustaining financial 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.65
Positive
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
Neutral
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.70
Positive
| 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
18.55
Price Trends
18.80
Negative
19.36
Negative
19.14
Negative
Market Momentum
-0.07
Positive
45.23
Neutral
32.44
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 18.55 is below the 20-day moving average (MA) of 19.11, below the 50-day MA of 18.80, and below the 200-day MA of 19.14, indicating a bearish trend. The MACD of -0.07 indicates Positive momentum. The RSI at 45.23 is Neutral, neither overbought nor oversold. The STOCH value of 32.44 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 (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
70 Outperform | $2.23B | 9.97 | 8.62% | 14.63% | -11.26% | -33.80% | |
69 Neutral | $6.70B | 18.04 | 5.55% | 9.67% | -0.97% | 3.75% | |
68 Neutral | $11.95B | 12.75 | 8.40% | 12.58% | 13.33% | ― | |
68 Neutral | $1.46B | 13.34 | 7.06% | 8.01% | -5.09% | 6.25% | |
67 Neutral | $630.99M | 9.91 | 14.22% | ― | 31.74% | 29.41% | |
63 Neutral | $14.20B | 10.11 | 9.01% | 4.34% | 16.34% | -11.27% | |
43 Neutral | $853.98M | ― | -19.41% | 22.13% | -24.40% | -210.65% |
* Financial Sector Average
Performance Comparison
VEL
Velocity Financial
18.71
1.21
6.91%
NLY
Annaly Capital
20.31
3.33
19.61%
ABR
Arbor Realty
11.75
0.23
2.00%
STWD
Starwood Property
19.77
1.65
9.11%
LADR
Ladder Capital
11.41
1.33
13.19%
RC
Ready Capital
4.97
-3.09
-38.34%
Velocity Financial Earnings Call Summary
Earnings Call Date: Mar 6, 2025 | % Change Since: -1.75% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Positive
The earnings call for Velocity Financial, Inc. presented a largely positive view on its 2024 performance, with strong growth in originations, revenue, and successful securitization efforts. Despite challenges related to high non-performing loans and the impact of wildfires, the company's financial position and positive outlook for 2025 suggest continued strength.Highlights
Record-Breaking Year-End Results
Velocity Financial, Inc. announced a record quarter and year-end results for 2024, with a 64% increase in originations and a 37% increase in net revenue. Q4 pretax ROE was an impressive 26.8%.
Strong Loan Production Growth
Total loan production for Q4 was $563.5 million, an 18.2% increase over Q3, with over 1,200 loans funded. The weighted average coupon on new health investment originations was 10.8%.
Positive NPL Resolution
In Q4, NPL resolution gains were $5.6 million on $79 million UPB resolved, demonstrating strong collection efforts and favorable resolution outcomes.
Robust Capital and Liquidity Position
Velocity closed the year with almost $96 million of liquidity, including $50 million in cash and cash equivalents, and $46 million in available liquidity on unfinanced collateral.
Successful Securitizations
Two securitizations were executed in Q4, raising over $586 million in securities. An additional $351 million was issued in early 2025, highlighting strong capital markets performance.
Lowlights
Impact of California Wildfires
The company experienced wildfires in Southern California, affecting two properties, albeit with no financial impact due to insurance coverage.
High Non-Performing Loan Rate
The non-performing loan rate remained relatively high at 10.7% at the end of Q4, consistent with a five-quarter average of about 10.3%, indicating ongoing challenges in managing delinquent assets.
Company Guidance
During the fourth quarter and full year 2024 conference call, Velocity Financial, Inc. reported a record performance with a 64% increase in originations, leading to a 37% rise in net revenue and a Q4 pretax return on equity (ROE) of 26.8%. The company's total loan production for Q4 was $563.5 million, marking an 18.2% increase over the previous quarter and a 60% year-over-year growth. The total loan portfolio ended the year at $5.1 billion, with a weighted average coupon of 9.53% and a low loan-to-value (LTV) ratio of 66.6%. Non-performing loans (NPLs) remained steady, with resolution gains of $5.6 million in Q4. The company also reported $96 million in liquidity and executed two successful securitizations totaling $586 million in Q4. The year concluded with core earnings of $0.60 per share in Q4 and $2.03 for the full year. Looking ahead, Velocity Financial anticipates continued growth and strong market demand in 2025.Velocity Financial Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
Velocity Financial Approves 2025 Executive Incentive Programs
Neutral
Jan 22, 2025
On January 21, 2025, Velocity Financial’s Compensation Committee approved the FY 2025 Annual Cash Incentive Program and Performance Stock Units Program for its executive officers. The programs set Core Net Income Annual Growth as the performance metric, with specific bonus opportunities tied to the growth levels achieved. Executives are eligible for cash bonuses and stock units based on both company performance and individual achievements in areas such as asset quality and strategic initiatives. The programs aim to incentivize leadership and strategic alignment with the company’s financial goals through 2027.
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.