Red Violet, Inc. (RDVT): A Bull Case Theory
We came across a bullish thesis on Red Violet, Inc. (RDVT) on @WelfareCapLLC on X (Twitter). In this article, we will summarize the bulls' thesis on RDVT. Red Violet, Inc. (RDVT)'s share was trading at $49.28 as of 23rd May. RDVT's trailing P/E was 80.79 according to Yahoo Finance.
An executive shaking hands with a customer as they seal a major Identity Verification Services deal.
Red Violet (RDVT) is a high-conviction long idea in the data processing and identity verification space, with shares up 70% since the initial pitch in September. The company, with a $686 million market cap, offers data solutions to verticals such as law enforcement, collections, fraud prevention, corporate risk, and real estate. The management team—together for over two decades—built the core data products behind giants like TransUnion and LexisNexis, and has now created a superior, cloud-native platform that is taking market share rapidly.
RDVT's advantage lies not just in data quantity, but in its ability to refine, link, and deliver high-throughput, accurate insights to customers. The company manages both proprietary and licensed datasets covering virtually every U.S. adult, including sensitive information like SSNs, addresses, and criminal records. Long-term, fixed-cost contracts for licensed data mean nearly every incremental dollar of revenue comes with extremely high margins. With over 70% of revenue contractually recurring and 96% gross retention, the business exhibits strong SaaS-like characteristics.
RDVT is also seeing dramatic operating leverage, with Q1 operating margins rising 8 points to 19% and operating income growing 110% on 26% revenue growth. Despite trading at 80x TTM earnings, continued high earnings growth justifies the valuation. The company remains under-the-radar, with minimal analyst coverage and low trading volume, partly due to its Boca Raton location. However, a clean balance sheet, $34 million in cash, insider ownership, key talent acquisitions, and even a recent special dividend support a strong bull case. The stock remains a top 10% position with expectations of exceeding a $1 billion valuation.
Red Violet, Inc. (RDVT) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held RDVT at the end of the fourth quarter which was 12 in the previous quarter. While we acknowledge the risk and potential of RDVT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RDVT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.
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