Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Verra Mobility’s annualized revenue growth of 8.9% over the last two years is below its five-year trend, but we still think the results were respectable. We also think Verra Mobility’s is one of the better Electrical Systems businesses as many of its peers faced declining sales because of cyclical headwinds.

This quarter, Verra Mobility grew its revenue by 5% year on year, and its $221.5 million of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 6.4% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and indicates its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.

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Operating Margin

Verra Mobility has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 18.9%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Verra Mobility’s operating margin rose by 5.9 percentage points over the last five years, as its sales growth gave it immense operating leverage.

In Q4, Verra Mobility generated an operating profit margin of negative 19.6%, down 30.6 percentage points year on year. Conversely, its revenue and gross margin actually rose, so we can assume it was recently less efficient because its operating expenses like marketing, R&D, and administrative overhead grew faster than its revenue.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Verra Mobility’s EPS grew at a remarkable 12.6% compounded annual growth rate over the last five years. Despite its operating margin expansion during that time, this performance was lower than its 14.4% annualized revenue growth, telling us that non-fundamental factors such as interest and taxes affected its ultimate earnings.

We can take a deeper look into Verra Mobility’s earnings quality to better understand the drivers of its performance. A five-year view shows Verra Mobility has diluted its shareholders, growing its share count by 1.2%. This dilution overshadowed its increased operating efficiency and has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Verra Mobility, its two-year annual EPS growth of 9.1% was lower than its five-year trend. This wasn’t great, but at least the company was successful in other measures of financial health.

In Q4, Verra Mobility reported EPS at $0.33, up from $0.24 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Verra Mobility’s full-year EPS of $1.24 to grow 5.7%.

Key Takeaways from Verra Mobility’s Q4 Results

It was encouraging to see Verra Mobility beat analysts’ EPS and full-year EPS guidance expectations this quarter. On the other hand, its full-year EBITDA forecast slightly missed. Zooming out, we think this was a decent quarter featuring some areas of strength but also some blemishes. The market seemed to focus on the negatives, and the stock traded down 1.4% to $25.55 immediately after reporting.

Is Verra Mobility an attractive investment opportunity at the current price? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free .