Stock Analysis

Walker & Dunlop (NYSE:WD) Has Rewarded Shareholders With An Exceptional 377% Total Return On Their Investment

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NYSE:WD
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Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. For example, the Walker & Dunlop, Inc. (NYSE:WD) share price is up a whopping 345% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. On top of that, the share price is up 22% in about a quarter. But this could be related to the strong market, which is up 9.4% in the last three months.

See our latest analysis for Walker & Dunlop

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Walker & Dunlop achieved compound earnings per share (EPS) growth of 23% per year. This EPS growth is lower than the 35% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
NYSE:WD Earnings Per Share Growth March 15th 2021

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Walker & Dunlop's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Walker & Dunlop the TSR over the last 5 years was 377%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Walker & Dunlop has rewarded shareholders with a total shareholder return of 105% in the last twelve months. That's including the dividend. That's better than the annualised return of 37% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 4 warning signs we've spotted with Walker & Dunlop (including 1 which is a bit concerning) .

Walker & Dunlop is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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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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