What a brutal six months it’s been for Verra Mobility. The stock has dropped 21% and now trades at $21.92, rattling many shareholders. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Following the pullback, is now the time to buy VRRM? Find out in our full research report, it’s free.
Why Is Verra Mobility a Good Business?
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
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Verra Mobility grew its sales at an exceptional 14.4% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers. 
2. Elite Gross Margin Powers Best-In-Class Business Model
Cost of sales for an industrials business 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.
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 62.3% gross margin over the last five years. That means Verra Mobility only paid its suppliers $37.73 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 19.6% over the last five years.
Final Judgment
These are just a few reasons why we're bullish on Verra Mobility. With the recent decline, the stock trades at 16.4× forward price-to-earnings (or $21.92 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More Than Verra Mobility
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