Is Red Violet, Inc. overvalued or undervalued?

As of 6 November 2024, the valuation grade for Red Violet, Inc. has moved from fair to very expensive, indicating a significant shift in its market perception. The company appears to be overvalued, with a P/E ratio of 74, which is substantially higher than the peer average, such as Bandwidth, Inc. with a P/E of -33.99 and 8x8, Inc. at -14.49. Additionally, Red Violet's EV to EBITDA stands at 30.15, compared to Perfect Corp.'s more attractive ratio of 30.93, further highlighting its relative overvaluation.
The company's financial metrics also reveal concerning trends, including a Price to Book Value of 6.93 and an EV to Sales ratio of 7.56, which suggest high valuation multiples that may not be justified by its performance metrics, such as a ROE of 9.43% and a ROCE of 17.62%. Despite a strong 1-year stock return of 120.56% compared to the S&P 500's 10.26%, the current valuation levels raise questions about sustainability and future growth potential, reinforcing the conclusion that Red Violet, Inc. is overvalued in the current market context.