Verra Mobility Corporation (NASDAQ:VRRM) is in the business of making cities smarter and safer through technology—and it’s operating in a sector that’s picking up serious momentum. The global smart mobility market is expected to expand at a brisk pace, with forecasts pointing to a 21% compound annual growth rate over the next seven years.
The stock has delivered solid returns over the longer term, climbing more than 45% in the past three years. But it’s been a rockier ride lately—shares are down nearly 10% over the past 12 months. That raises a key question for investors: where does Verra go from here, and what are analysts predicting for its future?
A Big Win in New York
At the end of Q1, NYC Mayor Eric Adams and DOT Commissioner Ydanis Rodriguez reported that Verra Mobility had been selected to run the city’s automated traffic enforcement systems.
The existing agreement runs through the end of this year, but a much larger renewal is on the table, one that is expected to last for another five years. This contract is a major one, involving the citywide management of red-light and speed cameras, enforcement in bus-only lanes, and weight-monitoring systems on the Brooklyn-Queens Expressway.
With that opportunity in play and momentum building, Verra’s leadership seems increasingly optimistic about what lies ahead.
Verra Mobility’s Share Repurchase
Verra Mobility Board initially authorized a share repurchase program with an aggregate worth up to $100 million of its class A common stock shares over an 18-month period.
Bulls can get excited by the fact that, when the period ended, it was extended to an additional $100 million under the existing program, providing the leadership team with about $112.70 million of fuel for future repurchases.
In December of last year, Verra Mobility entered into an accelerated share repurchase agreement with a third-party financial institution and paid the $112.70 million to receive over 3.8 million shares. After the final settlement in March of this year, all repurchased shares were subsequently retired.
Passenger Volume a KPI For Verra
First quarter results for fiscal 2025 saw a 6% year-over-year growth in the top line to $223.25 million, driven by a surge in all of Verra Mobility’s segmental performance.
The commercial services segment reported a top line of $101.39 million, accounting for 45% of the overall revenue, which grew by 6% from the prior year’s period. This was due to an increase in travel volume. Travel is an important factor that fuels growth.
According to the Transportation and Security Administration, passenger volume increased by 1% year-over-year for the quarter. This segment was also faced with tailwinds from product adoption and increased tolling activity. This growth in tolling activity across the company’s RAC and FMC customers.
Government Revenues On The Rise
Verra Mobility’s government solutions revenue increased by 4% from its year-ago value to $93.98 million, making up 42% of the total top line. This was primarily due to a $3.20 million increase from the expansion of bus lane enforcement programs and back-office SaaS programs.
However, Verra Mobility’s parking solutions segment recorded a marginal decline year-over-year and came in at $16.53 million. This had a minor impact because this segment accounts for approximately 7% of its total top line. The biggest leap was recorded by its product sales, which grew by 62% year-over-year to $11.35 million. However, customer buying activity varies from period to period.
This sales growth is also reflected in Verra Mobility’s bottom line. Net income increased 11% from the prior year’s period to $32.34 million. This accounts for approximately 14% of the total top line. Adjusted EBITDA grew 3% from its year-ago value to $95.44 million, but the company’s adjusted EBITDA margin declined from 44% to 43%.
The bad news for shareholders is the company is burning cash. Verra Mobility’s cash, cash equivalents, and restricted cash balance declined by 25% year-over-year to $114.53 million. It still has significant debt, but it is declining. As of March 31, 2025, its net debt was $934.90 million and net leverage was 2.3x, as compared to $968 million and 2.4x as of December 31, 2024.
What Does Verra Mobility’s Outlook Look Like?
For the full year 2025, Verra Mobility expects total revenue to come in between $925 million and $935 million, which reflects a year-over-year growth between 5% and 6%.
Adjusted EBITDA is projected to be between $410 million and $420 million, reflecting a growth rate of 2% to 5% year-over-year.
Verra Mobility expects to generate between $175 million and $185 million in free cash flow.
What Should You Do with Verra Mobility Now?
After the contract in New York City, Verra Mobility has extended its reach in the area. It is also in a position to spend cash to repurchase shares. At the same time, growth has been quite subdued. The outlook also does not project particularly good gains at the moment.
Valuation also remains quite stretched and the price sits at 111.48x its trailing-12-month earnings, which is significantly higher than the industry average.
What Is The Target Price For VRRM Stock?
VRRM stock price target sits just above the current share price at $28.92 per share according to the consensus among 6 analysts. If they’re right that would correlate to a move higher of around 16% from present levels.
With management buying back shares and net income expected to grow this year, sufficient tailwinds are likely to produce the demand needed to get the stock higher.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.
