Red Violet, Inc. (RDVT) – Sell Signal Amid Bear‑Market Regime and Slipping Share Price

Red Violet closed at $74.00, down 4.11 % as of 2026‑10‑16. The LOPJLB proprietary model now flags a SELL directional signal with a ‑5 score, reflecting a bearish market regime that has persisted for three days.

Red Violet has been the subject of a flurry of analyst commentary over the past month. Zacks highlighted three reasons why growth investors “shouldn’t overlook” the stock, emphasizing its rapid earnings‑per‑share expansion and expanding addressable market for identity‑intelligence services. Read the full Zacks piece.

A separate defenseworld.net story noted that Red Violet recently hit a new 12‑month high, prompting some market participants to question whether the rally is sustainable given the broader technology sector’s valuation stretch. View the article.

MarketBeat reported that the company is actively scouting M&A opportunities as its AI‑driven identity platform expands across key verticals, a strategic thrust that management says could accelerate revenue growth beyond the current trajectory. See MarketBeat’s alert.

Earlier in September, GlobeNewswire announced that Red Violet’s FOREWARN service will provide identity verification to the Pacific West Association of REALTORS®, a partnership intended to deepen the firm’s foothold in the real‑estate safety niche. Read the release.

Finally, the company presented at Citi’s 2026 Global TMT Conference, where senior executives outlined the roadmap for integrating AI across the idiCORE platform and discussed capital‑allocation priorities for the coming fiscal year. Conference details.

Fundamentals and Valuation

Red Violet’s valuation metrics remain elevated relative to historical averages, underscoring the premium investors have placed on its growth narrative. The trailing twelve‑month (TTM) price‑to‑earnings (P/E) ratio sits at 63.79×, while the forward P/E contracts modestly to 50.63×. Both figures dwarf the long‑run market average, a disparity reflected in the “PE vs hist avg %” of 0.21, indicating the current multiple is roughly 21 % above the historical norm for the stock.

Enterprise value (EV) to EBITDA stands at 38.13×, and EV to EBIT is even higher at 64.36×, suggesting that earnings before interest and taxes are heavily discounted in the market’s pricing. The price‑to‑book (P/B) ratio of 9.36× and price‑to‑free‑cash‑flow (P/FCF) of 42.64× further illustrate the premium placed on the firm’s balance‑sheet assets and cash‑generation potential.

Profitability metrics have improved alongside revenue expansion. Gross margins have risen to 87.38 %, while operating margins are 17.89 % and net margins 16.54 %. Return on invested capital (ROIC) is a robust 23.48 %, and return on equity (ROE) and return on assets (ROA) sit at 15.64 % and 13.61 %, respectively. These figures signal efficient capital deployment and a strong ability to convert earnings into shareholder value.

Revenue growth remains a key driver, with a 20.17 % year‑over‑year increase, while earnings per share (EPS) surged 88.06 % in the same period. Free‑cash‑flow (FCF) yield is modest at 2.35 %, and the company’s buyback yield is 0.30 %, indicating a relatively low level of shareholder return via repurchases at present.

The following snapshot captures the most salient valuation and profitability ratios:

Analyst consensus remains bullish, with an average target price of $84.33 and a “Buy” recommendation despite the elevated multiples. The Altman Z‑score of 83.71 signals a strong financial health profile, while the debt‑to‑equity ratio of 2.37 reflects a leveraged balance sheet that may warrant monitoring in a tightening credit environment.

The composite quality score of 51.61 and growth score of 67.06 place Red Violet in the “Balanced” archetype, reflecting a blend of high‑growth characteristics tempered by solid profitability and moderate valuation risk.

Earnings Call

Red Violet’s most recent earnings call, covering Q1 2026, reinforced the company’s narrative of record‑setting performance and an AI‑centric growth strategy. Management announced $25.8 million in quarterly revenue—a new high—paired with an 85 % adjusted gross margin and a 41 % adjusted EBITDA margin. The CEO, Derek Dubner, highlighted AI as a “force multiplier” that is accelerating product innovation and deepening the value of the firm’s proprietary identity graph.

“Record revenue, record margins, record EBITDA and one of the strongest quarters for new customer onboarding in our company’s history,” Dubner said during the call.

“We crossed that revenue threshold for the first time on $25.8 million in quarterly revenue, a $100 million‑plus annual run rate, we delivered adjusted gross margin of 85 % and adjusted EBITDA margin of 41 %,” he added.

“AI is acting as a force multiplier, increasing the value of our data, accelerating our pace of innovation, strengthening our position within the markets we serve,” the executive continued.

The call underscored several operational milestones: the idiCORE platform added 400 billable customers, bringing the total to 10,422, while the FOREWARN service grew to 417,000 users across 640 REALTOR associations. Capital allocation shifted from aggressive share repurchases in 2024 to a balanced approach that still includes a $15.6 million share‑repurchase program (73,250 shares repurchased this quarter).

Management’s tone was markedly upbeat, with a management tone score of 0.90, though guidance remained vague. No specific revenue or margin targets were disclosed for the remainder of 2026, leaving investors to infer future performance from the company’s historical “Rule of 40” compliance and the continued rollout of AI‑enhanced features.

Key concerns raised during the call included persistent headwinds in the real‑estate vertical—attributed to elevated home prices and interest rates—and competitive pressure as rivals migrate to cloud‑native architectures. Additionally, the firm acknowledged execution risk surrounding AI integration, noting that successful deployment is essential to sustain the margin expansion observed to date.

LOPJLB Signal Read

The LOPJLB model currently assigns a SELL directional signal to Red Violet, operating within a BEAR market regime that has been in place for the past three days. The composite performance score stands at 41.50, while the quality‑focused FUND score is 51.61, placing the stock in the Balanced archetype (Value = 47.00, Growth = 67.06, GARP = 45.99, Quality = 51.61).

Investors can explore the interactive chart above on the RDVT page for a visual overlay of the signal, as well as the full methodological framework that underpins the LOPJLB scoring system. Detailed methodology is available at the LOPJLB research methodology page.

Explore further:

• Detailed RDVT profile: https://www.lopjlb.com/stock/RDVT
• Full earnings‑call transcript and analysis (if you used the call intel): https://www.lopjlb.com/stock/RDVT/earnings.md
• LOPJLB stock screener for similar opportunities: https://www.lopjlb.com/screener

The information provided herein is for research purposes only and does not constitute investment advice. Readers should conduct their own due diligence and consider their individual risk tolerance before making any investment decisions.

This post is independent quantitative research, not investment advice. LOPJLB signals are model outputs derived from price, volume, and fundamentals. Past backtests do not guarantee future results. Position sizing, execution, and risk management remain the reader's responsibility.