Stock Analysis

Here's Why We Think Walker & Dunlop (NYSE:WD) Is Well Worth Watching

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NYSE:WD
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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like Walker & Dunlop (NYSE:WD). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Walker & Dunlop

How Fast Is Walker & Dunlop Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Walker & Dunlop grew its EPS by 8.0% per year. That's a pretty good rate, if the company can sustain it.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). I note that Walker & Dunlop's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Walker & Dunlop maintained stable EBIT margins over the last year, all while growing revenue 29% to US$1.1b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NYSE:WD Earnings and Revenue History July 5th 2021

Fortunately, we've got access to analyst forecasts of Walker & Dunlop's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Walker & Dunlop Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Walker & Dunlop insiders have a significant amount of capital invested in the stock. Notably, they have an enormous stake in the company, worth US$255m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Should You Add Walker & Dunlop To Your Watchlist?

One important encouraging feature of Walker & Dunlop is that it is growing profits. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. However, before you get too excited we've discovered 2 warning signs for Walker & Dunlop that you should be aware of.

Although Walker & Dunlop certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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What are the risks and opportunities for Walker & Dunlop?

Walker & Dunlop, Inc., through its subsidiaries, originates, sells, and services a range of multifamily and other commercial real estate financing products and services for owners and developers of real estate in the United States.

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Rewards

  • Trading at 35.2% below our estimate of its fair value

  • Earnings are forecast to grow 10.03% per year

Risks

  • Shareholders have been diluted in the past year

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