- If you are wondering whether Walker & Dunlop at around US$43.82 is starting to look like value, the recent share performance gives plenty to think about.
- The stock has seen a 2.6% decline over the past week, a 30.7% decline over the last month, and returns of 25.4% year to date and 46.7% over the past year, with a 33.2% and 51.6% decline over the last 3 and 5 years respectively.
- These moves have put valuation front and center for many investors who are reassessing what they are willing to pay for Walker & Dunlop. This article was prompted to provide ongoing coverage so you can see how current pricing lines up against different ways of thinking about value.
- Right now, Walker & Dunlop scores 0 out of 6 on our valuation checks, which you can see in detail on its valuation scorecard, and the next sections will walk through standard valuation methods before finishing with a more complete way to think about what the stock might be worth.
Walker & Dunlop scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Walker & Dunlop Excess Returns Analysis
The Excess Returns model looks at how much profit a company is expected to generate above the return that equity investors require, then capitalizes those "excess" profits to reach an intrinsic value per share.
For Walker & Dunlop, the model uses a Book Value of US$51.96 per share and a Stable EPS of US$3.07 per share, both based on median figures from the past 5 years. The implied Average Return on Equity is 5.92%. The Cost of Equity is US$3.81 per share, which results in an Excess Return of US$0.74 per share in the negative, suggesting returns that do not cover the required equity charge in this framework. The Stable Book Value used is again US$51.96 per share.
On this basis, the Excess Returns model produces an intrinsic value estimate of about US$33.18 per share. Compared with the recent share price around US$43.82, this implies the stock is about 32.1% above the model’s estimate, so the Excess Returns view points to a rich valuation.
Result: OVERVALUED
Our Excess Returns analysis suggests Walker & Dunlop may be overvalued by 32.1%. Discover 53 high quality undervalued stocks or create your own screener to find better value opportunities.
Approach 2: Walker & Dunlop Price vs Earnings
For profitable companies, the P/E ratio is a straightforward way to think about value because it links the share price directly to the earnings that support it. The level of P/E investors are usually comfortable with tends to reflect what they expect for future growth and how much risk they see in those earnings, with higher growth and lower perceived risk often supporting higher P/E levels.
Walker & Dunlop currently trades on a P/E of 26.78x. That sits above the Diversified Financial industry average P/E of 17.58x and well above the peer group average of 8.40x. Simply Wall St also provides a “Fair Ratio” of 16.91x for Walker & Dunlop, which is an estimate of the P/E that might be appropriate given factors such as its earnings profile, industry, profit margins, market cap and risk characteristics.
This Fair Ratio can be more informative than a simple comparison with peers or the industry because it looks at company specific drivers rather than just broad group averages. When set against this Fair Ratio of 16.91x, the current P/E of 26.78x indicates that Walker & Dunlop is trading on a richer multiple than the model suggests.
Result: OVERVALUED
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Upgrade Your Decision Making: Choose your Walker & Dunlop Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives take the story you believe about Walker & Dunlop, link it to a simple forecast for revenue, earnings and margins, convert that into a Fair Value, and then keep updating that view automatically when new information such as earnings, news or analyst updates arrives. On Simply Wall St's Community page you might see one Narrative that builds around the US$92.50 analyst consensus target with assumptions about stronger growth and higher margins. Another focuses on a more cautious Fair Value of US$67.50 with lower revenue growth and a 14.04x future P/E. By comparing each Narrative's Fair Value to the current share price you can decide which story you agree with and whether the stock looks closer to buy, hold or sell territory for you.
Do you think there's more to the story for Walker & Dunlop? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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