Verra Mobility currently trades at $23.72 per share and has shown little upside over the past six months, posting a middling return of 3.1%.
Is now the time to buy VRRM? Or does the price properly account for its business quality and fundamentals? Find out in our full research report, it’s free.
Why Are We Positive On Verra Mobility?
Managing over 165 million tolling transactions per year, Verra Mobility (NYSE: VRRM) is a leading provider of smart mobility technology that enhances safety, efficiency, and convenience on roadways.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Verra Mobility’s 13.8% annualized revenue growth over the last five years was exceptional. Its growth beat the average industrials company and shows its offerings resonate with customers. 
2. Elite Gross Margin Powers Best-In-Class Business Model
For industrials businesses, cost of sales is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics in the short term and a company’s purchasing power and scale over the long term.
Verra Mobility has best-in-class unit economics for an industrials company, enabling it to invest in areas such as research and development. Its margin also signals it sells differentiated products, not commodities. As you can see below, it averaged an elite 62.1% gross margin over the last five years. Said differently, roughly $62.15 was left to spend on selling, marketing, R&D, and general administrative overhead for every $100 in revenue. 
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Verra Mobility has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 20% over the last five years.
Final Judgment
These are just a few reasons why we're bullish on Verra Mobility, but at $23.72 per share (or 17.4× forward P/E), is now the right time to buy the stock? See for yourself in our in-depth research report, it’s free.
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