06-13-2018: Walker & Dunlop, Inc. (WD): One of the More Consistent Real Estate Financiers & Developers

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Recommendation

Walker & Dunlop, Inc.

The real estate development and home builder group of companies has been leveling off of late after months of low interest rates encouraging borrowing, sales, and higher real estate prices. This has left the group as a whole somewhat underperforming, but there are exceptions, one of which is Walker & Dunlop, Inc. (WD). This company has managed to keep expanding financing new developments all over the U.S., a large part of which are multi-family communities. The company helps facilitate getting government loans to finance large building projects or renovations in choice locations about the country. It has been around since 1937.

The stock of WD seems to have been held back mainly by association with a group of lenders it is in. As interest rates rise, business is beginning to taper off. Various prediction systems and indicators for stock charts seem to work very well on the chart of WD. For example, "Wall Street Analyzer" uses a simple moving average crossover system that seems to work quite well to pick turning points for a "reactive" chart. However, beware in that system, the programmer chose the wrong colors, i.e. red for the short average and green for the long one which is the reverse of the normal crossover colors.

The company's website features choice locations it is financing, and includes transcripts of conference calls rather than a CEO Letter to Shareholders which is what we would have preferred. The Zenith Index on the stock is extremely marginal, as there are issues with "cash flow". Net change in cash is strongly positive, but the source of that cash is mainly vulernable financing.

How did the company make out in the financial crisis of 2008? Terrible! The stock is now five times higher than it was then. This is a Market Grader choice stock, but Standard & Poor's gives it only an average rating. Institutions are strongly net acquirers and Dimensional Fund Advisors is prominent among them.

Other unique features include a strongly positive rating from the "Gurus" in Val Idea's website. It appears the stock has further to go to the upside but because of its reactive nature, one should probably wait for a signal to do a short-term short sale. "Stock Consultant" sees a high potential for a profitable very short-term short trade.

One of the issues that comes up in "news" on this stock, which features mainly public relations releases about new real estate developments all over the U.S. for this Texas-based company, is objections because of environmental concerns by city councils and environmentalists, so that not all developments are encouraged by locals. This causes loss of time and energy expenditures by the company in finding new locations. Often it does better by renovating existing ones.





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Zenith Index

Under current market conditions, a Zenith Index Score of 1.20 or above is required for a positive rating on this factor. 1.21 -1.30 is considered acceptable, 1.30-1.40 is considered strong and
1.40 is considered exceptionally strong. Accounting statements in this section often contain mistakes, especially in earlier years' totals, but data is deemed sufficient for us to give a rating. More accurate financial statements follow in the next section.

Walker & Dunlop, Inc. (WD)                                Exchange: NYSE
7501 Wisconsin Avenue
Suite 1200 E                     Sector: Financial Services
Bethesda, MD 20814               Industry:Specialty Finance

Walker & Dunlop, Inc., through its subsidiaries, originates, sells, and
services a range of multifamily and other commercial real estate loans
for owners and developers of real estate in the United States. The
company offers multifamily properties and commercial real estate finance
products, such as first mortgage loans, second trust loans, supplemental
financings, construction loans, mezzanine loans, and bridge/interim
loans. It provides multifamily finance for multifamily, manufactured
housing communities, student housing, affordable, and senior housing
properties under the Fannie Mae DUS program; and FHA finance, such as
construction and permanent loans to developers and owners of multifamily
housing, affordable housing, senior housing, and healthcare facilities.
The company also acts as an intermediary in the placement of commercial
real estate debt between institutional sources of capital, including
life insurance companies, investment banks, commercial banks, pension
funds, commercial mortgage backed securities (CMBS) issuers, and other
institutional investors, as well as owners of various types of
commercial real estate. In addition, it advises on capital structure;
develops the financing package; facilitates negotiations between its
client and institutional sources of capital; coordinates due diligence;
and assists in closing the transaction, as well as offers interim loans
and CMBS products, and investment sales brokerage services. Further, the
company offers underwriting and risk management, servicing and asset
management, and direct loan originators and correspondent network
services. Walker & Dunlop, Inc. was founded in 1937 and is headquartered
in Bethesda, Maryland.

Last Trade:  58.55                           52-Week Range:  61.44 -  42.66
Employees: 625                               Avg.Volume:     241,722 Shares

Corporate Governance:
Pillar scores are Audit: 1; Board: 3; Shareholder Rights: 7; Compensation: 10.
         (A lower number means less governance risk.)

EPS:  6.56    Dividend Amount: $ 1.00          Yield:  1.71%
             Ex-Dividend Date: May 17, 2018    Payout Ratio:   3.92

Key Statistics:

    Trailing P/E:   8.99              Forward P/E (est.):  10.17
                                           Target Price:  61.00

Qrtly Stock Price Growth (yoy):  19.05%               Beta:   0.73
Qrtly S&P Index   Growth (yoy):  -6.70%        Short Ratio:   4.43%
    Qrtly Revenue Growth (yoy):  14.39%         Shares Out:  31030000
   Qrtly Earnings Growth (yoy):   0.00%

          Book Value:  26.97                    Debt/Equity: 117.00%
    Price/Book Value:   2.19        Operating Profit Margin:  32.01%
         Price/Sales:   2.65                  Profit Margin:  29.60%
         Market Cap:   1,830,000,000       Return on Equity:  27.76%
    Enterprise Value:   2,590,000,000      Return on Assets:   9.07%

    Operating Cash Flow:    600,560,000
         Free Cash Flow:       -125,985



Annual Income Statement:                          (All numbers in thousands)
  Period Ending                             12/31/2017  12/31/2016  12/31/2015

  Total Revenue                                702,355     566,037     456,636
  Cost of Revenue                                    0           0           0
  Gross Profit                                 702,355     566,037     456,636

Operating Expenses:
  Research & Development                             0           0           0
  Selling, General & Administrative            296,334     233,895     190,533
  Non-Recurring Expenses                             0           0           0
  Other Operating Expenses                      41,114      34,934      32,564
  Total Operating Expenses                     468,694     380,256     321,270

Operating Income or Loss                       233,661     185,781     135,366

Income from Continuing Operations:
  Total Other Income/Expenses Net                    0           0           0
  Earnings Before Interest & Taxes                   0           0           0
  Interest Expense                                   0           0           0
  Income Before Taxes                          233,661     185,781     135,366
  Income Tax Expense                            21,827      71,470      52,771
  Minority Interest                              5,565       4,858       4,449

Net Income from Continuing Op.s                211,834     114,311      82,595

Non-recurring Events:
  Discontinued Operations                            0           0           0
  Extraordinary Items                                0           0           0
  Effect of Accounting Changes                       0           0           0
  Other Items                                        0           0           0
  Net Income                                   211,127     113,897      82,128
  Preferred Stock & Other Adjustments                0           0           0

Net Income Avail to Common Shares              211,127     113,897      82,128



Annual Cash Flow Statement:                   (All numbers in thousands)
  Period Ending                         12/31/2017    12/31/2016    12/31/2015

  Net Income                               211,834       114,311        82,595

Operating Activities:
  Depreciation                             131,246       111,427        98,173
  Adjustments to Net Income                720,834       507,816    -1,524,306
  Changes in Accounts Recv'bls                   0             0             0
  Changes in Liabilities                    22,866        22,035         7,739
  Changes in Investories                         0             0             0
  Changes in other Oper'g Acts             -23,317        -1,390        -6,205

Total Cash Flow f Operations             1,067,642       759,366             0

Investing Activities:
  Capital Exenditures                       -5,207        -2,478        -1,413
  Investments                              -23,226       -25,893        -5,000
  Other Cash Flows fr Investing                  0             0             0

Total Cash Flows from Investing            104,136       -66,761       -27,232

Financing Activities:
  Dividends Paid                                 0             0             0
  Sale of Purchase of Stock                  3,013         3,765         7,553
  Net Borrowings                        -1,053,715      -680,859     1,430,947
  Other Cash Flows fr Financing             -3,890        -3,635             0

Total Cash Flows from Financing         -1,089,491             0             0

  Effect of Exchange Rate Chg                    0             0             0

Change in Cash & Cash Equiv.                     0             0             0



Annual Balance Sheets:                              (All Numbers in Thousands)
  Period Ending                          12/31/2017    12/31/2016    12/31/2015
Current Assets:
  Cash & Cash Equivalents                   191,218       118,756       136,988
  Short Term Investments                          0             0             0
  Net Receivables                           108,203       249,836       255,337
  Inventory                                       0             0             0
  Other Current Assets                      958,506     1,868,219     2,504,417
  Total Current Assets                    1,257,927     2,236,811     2,896,742

  Long-Term Investments                           0             0             0
  Property, Plant & Equipt                        0             0             0
  Goodwill                                  123,767        96,420        90,338
  Intangible Assets                         635,532       522,882       413,498
  Accumulated Amortization                        0             0             0
  Other Assets                              180,844       134,495       102,735
  Deferred LT Asset Charges                       0             0             0

Total Assets                              2,208,427     3,052,432     3,514,991

Current Liabilities:
  Accounts Payable                          130,479        93,211        67,684
  Current Portion LT Debt                 1,103,477     2,158,742     2,815,265
  Other Current Liabilities                       0             0             0
  Total Current Liabilities               1,233,956     2,251,953      2,882,949

  Long Term Debt                            130,479        93,211        67,684
  Other Liabilities                       1,103,477     2,158,742     2,815,265
  Deferred LT Liab. Charges                       0             0             0
  Minority Interest                           5,565         4,858         4,449
  Negative Goodwill                           5,565         4,858         4,449

Total Liabilities                         1,562,869     2,606,379     3,191,553

Stockholder Equity:
  Misc. Options, Warrants                         0             0             0
  Redeemable Preferred Stock                      0             0             0
  Preferred Stock                                 0             0             0
  Common Stock                                  300           296           295
  Retained Earnings                         579,943       381,031       272,030
  Treasury Stock                                  0             0             0
  Capital Surplus                           229,173       228,889       215,575
  Other Stockhohlder Equity                       0             0             0
  Total Stockholder Equity                  809,416       610,216       487,900

Net Tangible Assets                         684,873       512,844       396,412


Walker & Dunlop, Inc. (WD)                  [Indices near +3.0, near zero,
                                            or < zero bear special attention.]
P/E Ratio Tests:
P/E Ratio < 28?            3.0000          P/E Ratio > 5?             1.0000
P/E Ratio Vs Growth Rate:  0.0000          Forward P/E Ratio < 28?    2.7532
Price/Sales Ratio < 2.3?   0.8679          Inventory/Sales < 5%?      1.0000
Sales < $1 Billion?        1.4238          Operating Margin < 7.5%?   0.2343

Balance Sheet Tests:
Debt/Equity < 0.40?        0.3419          Long-Term Debt Service:    3.0000
LTD Being Reduced?         3.0000          Short-Term Debt Service:   0.0000
Current Ratio > 2?         0.5097          Working Capital >= 1.5?    1.4910
Leverage Ratio < 20%?      1.5354          Debt/Assets < 1?           3.0000
Quick Ratio > 1?           3.0000          Inventory Turnover > 1?    1.0000
Share Equity Increase:     2.5771          Market Cap.< 1.5 Billion?  0.8197
                                           Intangibles < 3% Assets?   0.0873
Income Tests:
Profit Margin < 7.5%?      3.0000          EPS Annual Growth > 10%?   0.0539
Dividend Yield > 2.0%?     1.1696          EPS 3-yr Growth > 15?      0.0583
Enterprise Value/Revenue   2.6058          EPS Growth Consistent?     2.0000
Enterprise Value/EBITDA:   3.0000          Collection < 45 days?      0.8003
EPS Qrtly Growth > 10%?    0.0000          Gross Pft/Cur. LTD > 1?    0.6365
                                           Borrowing Int. Rate < 6%?  0.0421
Stock Performance Tests:
Volatility > 25%?          1.2227          % Held by Insiders < 5%?   0.6337
Beta > 1.25?               0.5840          % Held by Institut. < 50?  0.5899
50 Da MA > 200 Da MA?      0.2306          % Held by Institut. > 30?  2.8253
52-Wk Change vs. S&P 500:  1.3238          Short Ratio > 5?           0.8860
Price/Book Value < 3?      1.3819          Short % of Float > 20?     0.2865
Return on Assets > 17%?    0.5335          Average Volume > 100,000?  2.4172

Cash Flow Tests:
Oper. C.F. > Lever'd C.F: -3.0000          Positive Free Cash Flow?  -1.0000
Positive Oper. Cash Flow?  3.0000          Price to C.F.Ratio < 14?:  0.0000
                                           Cash Flow / Assets > 10%?  3.0000

WD     Walker & Dunlop, Inc.               Overall Zenith Index:      1.2021


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Financial Statements

Income Statement:

Balance Sheet:

Cash Flow Statement:






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Average to Current P/E Ratios
              (WD)     Walker & Dunlop Inc.

                               2013    2014    2015    2016    2017

          Annual Earnings:     1.21    1.58    2.65    3.65    6.56
Average Price During Year:    17.21   15.09   22.31   24.86   44.54

                P/E Ratio:    14.23    9.55    8.42    6.81    6.79

 Average 5-Year P/E Ratio  =   9.16
             Current Price =  59.91

Previous 5 Quarter Earnings:   1.35    1.08    1.06    3.06    1.16

           Current Annualized (Last Four Quarters) Earnings =   5.28
                                                           ________
                                 Average PE / Current PE =     0.81
                                                           --------

                                      ...a number above 1.00 is good
                                                1.00 or below is bad


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Zenith uses the "sentiment" score above or below 50 to award a positive or negative point in the Decision Matrix.

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As the short interest rises as a percentage of average daily share volume (Days to Cover), this is considered a measure of negative sentiment. Similarly, a decrease in that percentage is considered positive sentiment.

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Channeling Potential

 
The summary below includes a value for `Degree,' which refers on a
scale of 1 to 10 the range of a channel in the period under consi-
deration compared to the total range of price movement. It also looks
for the last closing price to be within the channel, otherwise zeroed.
The `Index' is the `Degree' weighted for volatility.  Generally, the
the higher the index, the more suitable is the stock for trading as
a `rolling stock' between channel high and low points.

Results for WALKER & DUNLOP INC.:
Symbol? WD
Total Months Available:  90
       Months in Cycle?   4

Months Covered by Periods:  12

Period 1           Period 2          Period 3
   H1      L1        H2      L2        H3      L3
  54.58   44.78     56.46   42.66     61.44   45.26

RANGE   =  61.44  TO   42.66            Close =  58.99
CHANNEL =  54.58  TO   45.26           Degree =   5
Volatility =  15.80%                    Index =   7
Channel Chart



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MACD Histogram Divergence

The theory is that connecting the two most recent peaks or valleys of the MACD histogram will signal the direction of the next major move.



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2 Days:



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Val Idea

6 out of 8 favorable, (positive opinion.)

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Neural Network Prediction

"Neurostock" can only track long trades. Therefore its performance, as tracked by itself on stocks which are consistently falling, may not appear as good as it could if each "sell" signal were a "short sale."

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Ultimate Trading Systems

3 out of 3 of the ultimate systems favor an upmove.


System Below:
Short term outlook: Positive: Bright Green, Negative: Bright Red
Long term outlook: Postive: Dark Green, Negative: Dark Red.




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Recommendation

Decision Weighting Factors
FactorsWeighted Points
News + 1
Comparison - 1
Industry - 1
Bond Issue 0
Zenith Index + 1
Non-GAAP vs. GAAP Earnings - 1
Cash Flow + 1
Average to Current P/E - 1
Ratios + 1
Market Grader + 1
Intrinsic Value DCF - 1
Fair Value Estimator + 1
Projected Earnings + 1
Research Reports - 1
Analysts + 1
Executive Perquisites - 1
Insider Activity - 1
Institutional Activity + 1
Management Reporting + 1
Short Interest + 1
Sentiment + 1
Standard & Poor's - 1
MACD Histogram Divergence + 1
Val Idea + 1
Stock Consultant - 1
Point & Figure + 1
Wall Street Analyzer + 1
Marketspace Chart + 1
Time Series Chart + 1
Neural Network + 1
Stock Options + 1
Ultimate Trading Systems + 1
Total + 11
Place 500 shares of Walker & Dunlop, Inc. ( WD ) on the Active List.