Red Violet, Inc. (NASDAQ:RDVT): Is the Market Wrong About This Stock?

Ladies and gentlemen, let me tell you something: the market is a fickle beast. It can love you one day and hate you the next. And right now, it seems to be giving Red Violet, Inc. (NASDAQ:RDVT) the cold shoulder. But let me ask you this: is the market wrong about this stock? Let's dive in and find out!

First things first, let's talk about the numbers. Red Violet just reported its fourth-quarter and full-year 2024 financial results, and they are nothing short of spectacular. The company saw a 30% increase in fourth-quarter revenue to a record $19.6 million, and a 25% increase in full-year revenue to $75.2 million. That's right, folks! This company is on fire!

But here's where it gets interesting. Despite these stellar financials, the stock price has been on a downward spiral. Why is that? Well, there are a few factors at play here.

First, let's talk about earnings per share (EPS). For the full year 2024, Red Violet's GAAP EPS was $0.50, which is a decrease from the previous year's $0.51. Now, I know what you're thinking: "But the revenue is up! How can the EPS be down?" Well, it's all about the math, folks. The company had a one-time deferred income tax benefit of $10.3 million in 2023, which inflated the EPS for that year. Without that benefit, the EPS would have been lower. So, in reality, the EPS is actually up year over year.

Second, let's talk about stock repurchases. Red Violet repurchased 292,744 shares of common stock in 2024 at an average price of $19.81 per share. Now, some investors might see this as a positive sign, as it shows that the company is confident in its future prospects. But others might see it as a way to artificially boost earnings per share rather than focusing on organic growth. It's all about perspective, folks.

Third, let's talk about the broader economic environment. The market is always looking for the next big thing, and right now, it seems to be focused on other sectors. But let me tell you something: Red Violet is a company that is built to last. It has a strong technology platform, superior solutions, and unique capabilities that outperform even its larger competitors. And with a disciplined approach to capital allocation, the company is well-positioned for continued growth and leadership in the analytics and information solutions industry.

Now, let's talk about the competition. Red Violet's recent financial performance has been notably strong, with record-breaking revenue and cash flow. For the fourth quarter of 2024, Red Violet reported a 30% increase in total revenue to $19.6 million, and for the full year 2024, revenue increased by 25% to $75.2 million. This performance is particularly impressive given that the company defied historic seasonality typically experienced during the fourth quarter. The company's gross margin also improved to 70% from 64%, and adjusted EBITDA increased by 68% to $4.5 million. Additionally, cash from operating activities increased by 59% to $6.7 million for the quarter and 59% to $24.0 million for the full year.



In comparison to its competitors in the analytics and information solutions industry, Red Violet's performance stands out. For instance, the company's adjusted EBITDA margin increased to 23% from 18%, and its adjusted net income increased by 390% to $1.3 million. These figures suggest that Red Violet is not only growing its revenue but also improving its profitability and operational efficiency. The company's ability to consistently deliver value to its customers, as evidenced by the addition of 183 new IDI customers and 18,451 new FOREWARN users during the fourth quarter, further supports its competitive edge.

Moreover, Red Violet's financial resilience is demonstrated by its disciplined approach to capital allocation, including the repurchase of 292,744 shares of common stock in 2024 at an average price of $19.81 per share and the announcement of a special cash dividend of $0.30 per share. These actions indicate that the company is confident in its future prospects and is committed to returning value to its shareholders.

So, what's the bottom line? Is the market wrong about Red Violet, Inc. (NASDAQ:RDVT)? I think it is. The company has strong financials, a competitive edge, and a disciplined approach to capital allocation. And with a "Strong Buy" rating from one analyst and a 12-month stock price forecast of $25.0, there's reason to be optimistic about the company's future prospects. So, do yourself a favor and take a closer look at this stock. You might just be surprised by what you find!