Red Violet, Inc. (NASDAQ:RDVT), might not be a large cap stock, but it saw a decent share price growth of 20% on the NASDAQCM over the last few months. The recent share price gains has brought the company back closer to its yearly peak. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Red Violet’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Red Violet

Is Red Violet Still Cheap?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 7.38% above our intrinsic value, which means if you buy Red Violet today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $37.83, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Red Violet’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Red Violet?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 49% over the next couple of years, the future seems bright for Red Violet. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? RDVT’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on RDVT, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Red Violet as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Red Violet and we think they deserve your attention.

If you are no longer interested in Red Violet, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.