VRRM stock is the IBD Stock Of The Day topped a buy point again Tuesday as the mobility solutions provider raised full-year guidance. In addition, a key strength indicator for the stock hit a new peak ahead of a high-stakes event Tuesday.
Verra Mobility provides smart transportation technology for car-rental companies and fleet operators. Customers include Avis, Hertz and Enterprise. Verra also serves cities, counties, school districts and law enforcement agencies. It helps those customers manage tolls, violations, parking and vehicle registrations, among other things.
On Tuesday, Verra raised its full-year guidance. It now expects revenue of $720 million-$740 million, up from $715 million prior. It forecast adjusted EBITDA of $325 million-$335 million, up from $322 million earlier.
"We continue to see strong secular trends driving revenue and adjusted EBITDA performance," said CEO David Roberts in a release. "Travel demand remains robust across the United States, driving growth in our Commercial Services business, and our Government Solutions and T2 Systems business segments continue to generate strong results."
The announcement came ahead of Verra Mobility's investor day event Tuesday to discuss its growth strategy and long-term outlook, after a key stakeholder urged a sale. The event starts at 1 p.m. ET.
On Monday, Verra announced a new nationwide toll management solution using a single device.
VRRM stock belongs to the IBD 50 list of top growth stocks. Its rivals include Conduent.
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VRRM Stock Breaks Out Ahead Of Investor Day
The IBD 50 stock rose 3.4% to 17.03 on the stock market today, extending a recent rally above the 50-day moving average.
In the process, VRRM stock topped a 16.83 buy point from a first-stage, cup-with-handle base in big volume. Shares briefly seized the entry Monday but closed below it. The stock retook the entry in heavy trade on Tuesday.
In addition, the relative strength line for Verra stock pegged a fresh new high Tuesday on the daily MarketSmith chart as shares broke out, a bullish sign. A rising RS line is a sign of outperformance vs. the S&P 500.
The pattern includes a 13% surge on May 10, after first-quarter earnings missed by a penny but the company guided to the high end of its prior forecast. It also announced $125 million in share repurchases. The base stretches back to late February and formed after a prior breakout fizzled.
A 94 Relative Strength Rating means that Verra Mobility has outperformed 94% of all stocks in IBD's database over the past year. The specialty enterprise software group is lagging, but VRRM stock is highly rated by IBD among 42 stocks in that group.
Verra Mobility Earnings Rebound
Verra Mobility earns a superior IBD Composite Rating of 97 out of 99, the highest in its group. This rating combines key fundamental and technical metrics in a single easy-to-use score.
A 78 EPS Rating reflects some tough recent quarters. Verra Mobility shows zero quarters of earnings acceleration but five quarters of accelerating sales, capped with a 90% gain in the latest quarter.
In all of 2021, Verra Mobility earnings rebounded 44% per share from a 25% decline the prior year.
Analysts on Wall Street expect Verra earnings to leap 143% in the June quarter. They expect profit to grow 29% in all of 2022 as sales rise 30%.
Out of eight analysts on Wall Street, five rate VRRM stock a buy and three have a hold. No one has a sell, FactSet shows.
The average $19.57 target price on Wall Street implies a further 18.8% upside for Verra stock after Monday's move.
Funds Pile Into Software Stock Despite Challenges
The IBD 50 stock shows seven quarters of rising fund ownership, according to the IBD Stock Checkup tool. As of June, 553 funds owned VRRM stock, up from 468 last June.
Funds holding Verra Mobility shares include T. Rowe Price New Horizons and a few A+ rated Fidelity funds. But challenges continue.
On July 14, Bloomberg reported that Scopia Capital, which owns 5.3% of Verra, wants the Mesa, Ariz.-based company to weigh a sale, leveraged buyout or breakup if it can't articulate a clear path forward at its investor day Tuesday.
Verra stock is little changed from pre-pandemic levels, despite significant growth and improvement in its business, Scopia said. The firm said that a sale, in whole or parts, could help Verra's shares achieve fair value.
On July 15, Baird analysts downgraded VRRM stock to neutral from outperform. They cited headwinds including rising interest rates, the potential for a travel slowdown and cost inflation, offsetting "very strong" execution of late.
