Walker & Dunlop’s stock price has taken a beating over the past six months, shedding 45.9% of its value and falling to $44.96 per share. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Is now the time to buy Walker & Dunlop, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Do We Think Walker & Dunlop Will Underperform?
Even with the cheaper entry price, we're swiping left on Walker & Dunlop for now. Here are three reasons there are better opportunities than WD and a stock we'd rather own.
1. Declining Net Interest Income Reflects Weakness
Net interest income commands greater market attention due to its reliability and consistency, whereas one-time fees are often seen as lower-quality revenue that lacks the same dependable characteristics.
Walker & Dunlop’s net interest income has declined by 40.1% annually over the last five years, much worse than the broader banking industry. This shows that lending underperformed its other business lines.
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Walker & Dunlop, its EPS declined by 14.6% annually over the last five years while its revenue grew by 2.6%. This tells us the company became less profitable on a per-share basis as it expanded.
3. Substandard TBVPS Growth Indicates Limited Asset Expansion
For banks, tangible book value per share (TBVPS) is a crucial metric that measures the actual value of shareholders’ equity, stripping out goodwill and other intangible assets that may not be recoverable in a worst-case scenario.
To the detriment of investors, Walker & Dunlop’s TBVPS grew at a sluggish 5.6% annual clip over the last two years.
Final Judgment
We see the value of companies driving economic growth, but in the case of Walker & Dunlop, we’re out. After the recent drawdown, the stock trades at 0.9× forward P/B (or $44.96 per share). While this valuation is reasonable, we don’t see a big opportunity at the moment. There are better stocks to buy right now. We’d recommend looking at one of our top software and edge computing picks.
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