Is Velocity Financial, Inc. overvalued or undervalued?

As of 7 August 2025, the valuation grade for Velocity Financial, Inc. has moved from attractive to very attractive, indicating a strong improvement in its valuation outlook. The company appears to be undervalued based on its key metrics, including a P/E ratio of 9, a PEG ratio of 0.61, and an EV to EBITDA ratio of 1.38. In comparison, peers such as Runway Growth Finance Corp. have a P/E of 5.47 and NewtekOne, Inc. has a P/E of 5.88, suggesting that Velocity is trading at a premium relative to its peers, yet still remains attractive given its strong performance indicators.
Despite recent underperformance against the S&P 500, with a year-to-date return of -5.73% compared to the index's 12.22%, Velocity's long-term performance shows resilience, with a 5-year return of 243.39% versus the S&P 500's 96.61%. This divergence highlights the potential for recovery and growth, reinforcing the view that Velocity Financial, Inc. is currently undervalued.