Walker & Dunlop’s stock price has taken a beating over the past six months, shedding 20.9% of its value and falling to $76.40 per share. This may have investors wondering how to approach the situation.
Is there a buying opportunity in Walker & Dunlop, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Walker & Dunlop Not Exciting?
Even though the stock has become cheaper, we're swiping left on Walker & Dunlop for now. Here are three reasons why you should be careful with WD and a stock we'd rather own.
1. Revenue Tumbling Downwards
Long-term growth is the most important, but within financials, a stretched historical view may miss recent interest rate changes and market returns. Walker & Dunlop’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 1.6% over the last two years. 
Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Walker & Dunlop, its EPS declined by 4.3% annually over the last five years while its revenue grew by 5.7%. This tells us the company became less profitable on a per-share basis as it expanded.
3. Growing TBVPS Reflects Strong Asset Base
We consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation.
Although Walker & Dunlop’s TBVPS declined at a 3.9% annual clip over the last five years. the good news is that its growth inflected positive over the past two years as TBVPS grew at an impressive 14.5% annual clip (from $16.26 to $21.30 per share).
Final Judgment
Walker & Dunlop’s business quality ultimately falls short of our standards. Following the recent decline, the stock trades at 1.4× forward P/B (or $76.40 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better opportunities elsewhere. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
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