Walker & Dunlop Inc (NYSE:WD) is expected to experience a -5.8% decline in earnings over the next year. What are the important facts you need to know? In this article we will analyse the latest data and future performance of this growth stock in more detail. See our latest analysis for WD
How is WD going to perform in the future?
I’m afraid we have to share with you concerning news regarding Walker & Dunlop’s earnings. Analysts covering the company are expecting the EPS to drop down to $3.02, a significant decline from previous levels of around $3.32. Based on the estimates this means a -16% reduction in three year’s time. Not the best news.
In the same period revenue is expected to grow from $507 Million to $585 Million in 2019 and profit is predicted to decline from $98 M to $87 M in 2019, during this period margins are on track to be a respectable 14.9% .
Is there any basis for growth?Walker & Dunlop has grown its earnings faster than the Banks industry average but that itself is not a very big accomplishment seeing as the industry has been struggling in the past year.
With Return on Equity of 18.8% Walker & Dunlop has performed better than the Banks industry average of 9.77%, whilst shareholders would consider this acceptable no doubt they are hoping for an improvement in the coming years. Slightly concerning, this metric is not expected to improve with analysts predicting ROE in 3 years to be 10.7%.
Return on equity (ROE) is a measure of how much profit (net income) a company makes as a percentage of the shareholders equity. Equity is made up of funds from the original issuing of shares and any retained earnings from previous financial years. It varies considerably across sectors, for this reason it is important to asses a stocks ROE relative to its industry. Whilst it is true that the higher the ROE the better the company is performing, ROE does have a weakness. A stock with a disproportionate amount of debt can lead to a small equity base. Thus, a small amount of net income (the numerator) could still produce a high ROE off a modest equity base (the denominator). For this reason investors should always consider the debt situation in conjunction with ROE.
Walker & Dunlop may have a few turbulent years in front of it but despite (or maybe because of) that it could still be offering an interesting investment opportunity. I recommend you see our latest FREE analysis to find out!
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