Intrinsic value of Walter Investment Management - WAC

Previous Close

$0.73

  Intrinsic Value

$4.14

stock screener

  Rating & Target

str. buy

+467%

Previous close

$0.73

 
Intrinsic value

$4.14

 
Up/down potential

+467%

 
Rating

str. buy

Our model is not good at valuating stocks of financial companies, such as WAC.

We calculate the intrinsic value of WAC stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -21.82
  11.80
  11.12
  10.51
  9.96
  9.46
  9.02
  8.61
  8.25
  7.93
  7.63
  7.37
  7.13
  6.92
  6.73
  6.56
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  5.32
Revenue, $m
  996
  1,114
  1,237
  1,367
  1,504
  1,646
  1,794
  1,949
  2,110
  2,277
  2,451
  2,631
  2,819
  3,014
  3,217
  3,428
  3,647
  3,875
  4,113
  4,361
  4,619
  4,888
  5,169
  5,462
  5,768
  6,087
  6,421
  6,771
  7,136
  7,518
  7,918
Variable operating expenses, $m
 
  1,492
  1,657
  1,830
  2,012
  2,202
  2,400
  2,607
  2,821
  3,045
  3,277
  3,513
  3,764
  4,024
  4,295
  4,577
  4,869
  5,174
  5,492
  5,822
  6,167
  6,526
  6,901
  7,292
  7,701
  8,128
  8,574
  9,040
  9,528
  10,038
  10,572
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  1,777
  1,492
  1,657
  1,830
  2,012
  2,202
  2,400
  2,607
  2,821
  3,045
  3,277
  3,513
  3,764
  4,024
  4,295
  4,577
  4,869
  5,174
  5,492
  5,822
  6,167
  6,526
  6,901
  7,292
  7,701
  8,128
  8,574
  9,040
  9,528
  10,038
  10,572
Operating income, $m
  -782
  -378
  -420
  -463
  -509
  -556
  -606
  -658
  -712
  -768
  -826
  -882
  -945
  -1,010
  -1,078
  -1,149
  -1,222
  -1,299
  -1,379
  -1,462
  -1,548
  -1,638
  -1,732
  -1,831
  -1,933
  -2,040
  -2,152
  -2,269
  -2,392
  -2,520
  -2,654
EBITDA, $m
  -701
  -293
  -326
  -360
  -396
  -433
  -473
  -513
  -556
  -600
  -645
  -693
  -742
  -794
  -847
  -903
  -961
  -1,021
  -1,083
  -1,149
  -1,217
  -1,287
  -1,361
  -1,439
  -1,519
  -1,603
  -1,691
  -1,783
  -1,880
  -1,980
  -2,086
Interest expense (income), $m
  269
  247
  258
  369
  486
  609
  737
  870
  1,009
  1,154
  1,304
  1,461
  1,623
  1,792
  1,968
  2,150
  2,340
  2,538
  2,743
  2,957
  3,180
  3,412
  3,654
  3,907
  4,171
  4,446
  4,734
  5,035
  5,349
  5,678
  6,022
Earnings before tax, $m
  -790
  -625
  -677
  -832
  -995
  -1,165
  -1,343
  -1,528
  -1,721
  -1,922
  -2,131
  -2,343
  -2,568
  -2,803
  -3,046
  -3,299
  -3,563
  -3,837
  -4,122
  -4,419
  -4,728
  -5,051
  -5,387
  -5,738
  -6,104
  -6,487
  -6,886
  -7,304
  -7,741
  -8,198
  -8,676
Tax expense, $m
  44
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -834
  -625
  -677
  -832
  -995
  -1,165
  -1,343
  -1,528
  -1,721
  -1,922
  -2,131
  -2,343
  -2,568
  -2,803
  -3,046
  -3,299
  -3,563
  -3,837
  -4,122
  -4,419
  -4,728
  -5,051
  -5,387
  -5,738
  -6,104
  -6,487
  -6,886
  -7,304
  -7,741
  -8,198
  -8,676

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  225
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  16,459
  18,255
  20,284
  22,416
  24,648
  26,980
  29,412
  31,946
  34,582
  37,324
  40,173
  43,134
  46,211
  49,409
  52,734
  56,191
  59,787
  63,530
  67,427
  71,486
  75,717
  80,129
  84,732
  89,536
  94,552
  99,793
  105,270
  110,996
  116,984
  123,250
  129,807
Adjusted assets (=assets-cash), $m
  16,234
  18,255
  20,284
  22,416
  24,648
  26,980
  29,412
  31,946
  34,582
  37,324
  40,173
  43,134
  46,211
  49,409
  52,734
  56,191
  59,787
  63,530
  67,427
  71,486
  75,717
  80,129
  84,732
  89,536
  94,552
  99,793
  105,270
  110,996
  116,984
  123,250
  129,807
Revenue / Adjusted assets
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
  0.061
Average production assets, $m
  1,552
  1,735
  1,928
  2,130
  2,342
  2,564
  2,795
  3,036
  3,287
  3,547
  3,818
  4,099
  4,392
  4,696
  5,012
  5,340
  5,682
  6,038
  6,408
  6,794
  7,196
  7,615
  8,053
  8,509
  8,986
  9,484
  10,005
  10,549
  11,118
  11,713
  12,337
Working capital, $m
  0
  557
  619
  684
  752
  823
  897
  974
  1,055
  1,138
  1,225
  1,316
  1,409
  1,507
  1,608
  1,714
  1,824
  1,938
  2,057
  2,180
  2,309
  2,444
  2,584
  2,731
  2,884
  3,044
  3,211
  3,385
  3,568
  3,759
  3,959
Total debt, $m
  4,276
  4,222
  6,049
  7,967
  9,976
  12,075
  14,264
  16,544
  18,917
  21,384
  23,949
  26,614
  29,383
  32,261
  35,254
  38,365
  41,601
  44,970
  48,477
  52,131
  55,939
  59,909
  64,052
  68,375
  72,890
  77,606
  82,536
  87,689
  93,079
  98,718
  104,619
Total liabilities, $m
  16,483
  16,429
  18,256
  20,174
  22,183
  24,282
  26,471
  28,751
  31,124
  33,591
  36,156
  38,821
  41,590
  44,468
  47,461
  50,572
  53,808
  57,177
  60,684
  64,338
  68,146
  72,116
  76,259
  80,582
  85,097
  89,813
  94,743
  99,896
  105,286
  110,925
  116,826
Total equity, $m
  -24
  1,825
  2,028
  2,242
  2,465
  2,698
  2,941
  3,195
  3,458
  3,732
  4,017
  4,313
  4,621
  4,941
  5,273
  5,619
  5,979
  6,353
  6,743
  7,149
  7,572
  8,013
  8,473
  8,954
  9,455
  9,979
  10,527
  11,100
  11,698
  12,325
  12,981
Total liabilities and equity, $m
  16,459
  18,254
  20,284
  22,416
  24,648
  26,980
  29,412
  31,946
  34,582
  37,323
  40,173
  43,134
  46,211
  49,409
  52,734
  56,191
  59,787
  63,530
  67,427
  71,487
  75,718
  80,129
  84,732
  89,536
  94,552
  99,792
  105,270
  110,996
  116,984
  123,250
  129,807
Debt-to-equity ratio
  -178.167
  2.310
  2.980
  3.550
  4.050
  4.480
  4.850
  5.180
  5.470
  5.730
  5.960
  6.170
  6.360
  6.530
  6.690
  6.830
  6.960
  7.080
  7.190
  7.290
  7.390
  7.480
  7.560
  7.640
  7.710
  7.780
  7.840
  7.900
  7.960
  8.010
  8.060
Adjusted equity ratio
  -0.015
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -834
  -625
  -677
  -832
  -995
  -1,165
  -1,343
  -1,528
  -1,721
  -1,922
  -2,131
  -2,343
  -2,568
  -2,803
  -3,046
  -3,299
  -3,563
  -3,837
  -4,122
  -4,419
  -4,728
  -5,051
  -5,387
  -5,738
  -6,104
  -6,487
  -6,886
  -7,304
  -7,741
  -8,198
  -8,676
Depreciation, amort., depletion, $m
  81
  85
  94
  103
  113
  123
  134
  145
  156
  168
  181
  189
  202
  216
  231
  246
  262
  278
  295
  313
  332
  351
  371
  392
  414
  437
  461
  486
  512
  540
  569
Funds from operations, $m
  768
  -540
  -583
  -729
  -882
  -1,042
  -1,209
  -1,383
  -1,565
  -1,754
  -1,950
  -2,154
  -2,366
  -2,586
  -2,815
  -3,053
  -3,301
  -3,558
  -3,826
  -4,106
  -4,396
  -4,700
  -5,016
  -5,346
  -5,690
  -6,050
  -6,425
  -6,818
  -7,229
  -7,658
  -8,107
Change in working capital, $m
  316
  59
  62
  65
  68
  71
  74
  77
  80
  84
  87
  90
  94
  98
  101
  105
  110
  114
  119
  124
  129
  135
  140
  147
  153
  160
  167
  175
  183
  191
  200
Cash from operations, $m
  452
  -599
  -645
  -794
  -950
  -1,113
  -1,283
  -1,461
  -1,645
  -1,837
  -2,037
  -2,244
  -2,460
  -2,684
  -2,917
  -3,159
  -3,411
  -3,673
  -3,945
  -4,229
  -4,526
  -4,834
  -5,156
  -5,492
  -5,843
  -6,209
  -6,592
  -6,993
  -7,411
  -7,849
  -8,307
Maintenance CAPEX, $m
  0
  -72
  -80
  -89
  -98
  -108
  -118
  -129
  -140
  -151
  -163
  -176
  -189
  -202
  -216
  -231
  -246
  -262
  -278
  -295
  -313
  -332
  -351
  -371
  -392
  -414
  -437
  -461
  -486
  -512
  -540
New CAPEX, $m
  -43
  -183
  -193
  -203
  -212
  -222
  -231
  -241
  -251
  -261
  -271
  -281
  -292
  -304
  -316
  -329
  -342
  -356
  -370
  -386
  -402
  -419
  -437
  -457
  -477
  -498
  -521
  -544
  -569
  -595
  -623
Cash from investing activities, $m
  700
  -255
  -273
  -292
  -310
  -330
  -349
  -370
  -391
  -412
  -434
  -457
  -481
  -506
  -532
  -560
  -588
  -618
  -648
  -681
  -715
  -751
  -788
  -828
  -869
  -912
  -958
  -1,005
  -1,055
  -1,107
  -1,163
Free cash flow, $m
  1,152
  -854
  -918
  -1,086
  -1,260
  -1,443
  -1,633
  -1,830
  -2,036
  -2,249
  -2,471
  -2,702
  -2,941
  -3,190
  -3,449
  -3,718
  -3,998
  -4,290
  -4,594
  -4,911
  -5,241
  -5,585
  -5,945
  -6,320
  -6,712
  -7,122
  -7,550
  -7,998
  -8,466
  -8,957
  -9,470
Issuance/(repayment) of debt, $m
  -687
  171
  1,827
  1,918
  2,009
  2,099
  2,189
  2,280
  2,373
  2,467
  2,565
  2,665
  2,769
  2,878
  2,992
  3,111
  3,237
  3,368
  3,507
  3,654
  3,808
  3,971
  4,142
  4,324
  4,515
  4,716
  4,929
  5,153
  5,390
  5,639
  5,902
Issuance/(repurchase) of shares, $m
  0
  2,475
  880
  1,045
  1,218
  1,398
  1,586
  1,781
  1,985
  2,196
  2,416
  2,639
  2,876
  3,122
  3,379
  3,645
  3,922
  4,211
  4,511
  4,825
  5,151
  5,492
  5,847
  6,218
  6,606
  7,011
  7,434
  7,877
  8,340
  8,824
  9,332
Cash from financing (excl. dividends), $m  
  -1,130
  2,646
  2,707
  2,963
  3,227
  3,497
  3,775
  4,061
  4,358
  4,663
  4,981
  5,304
  5,645
  6,000
  6,371
  6,756
  7,159
  7,579
  8,018
  8,479
  8,959
  9,463
  9,989
  10,542
  11,121
  11,727
  12,363
  13,030
  13,730
  14,463
  15,234
Total cash flow (excl. dividends), $m
  22
  1,792
  1,789
  1,878
  1,966
  2,054
  2,142
  2,231
  2,322
  2,414
  2,509
  2,602
  2,704
  2,811
  2,922
  3,038
  3,161
  3,289
  3,425
  3,568
  3,718
  3,877
  4,045
  4,222
  4,409
  4,606
  4,813
  5,032
  5,263
  5,506
  5,763
Retained Cash Flow (-), $m
  829
  -2,475
  -880
  -1,045
  -1,218
  -1,398
  -1,586
  -1,781
  -1,985
  -2,196
  -2,416
  -2,639
  -2,876
  -3,122
  -3,379
  -3,645
  -3,922
  -4,211
  -4,511
  -4,825
  -5,151
  -5,492
  -5,847
  -6,218
  -6,606
  -7,011
  -7,434
  -7,877
  -8,340
  -8,824
  -9,332
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -682
  909
  833
  748
  656
  556
  450
  337
  218
  93
  -37
  -172
  -312
  -457
  -607
  -762
  -922
  -1,087
  -1,257
  -1,433
  -1,614
  -1,802
  -1,996
  -2,197
  -2,405
  -2,621
  -2,844
  -3,077
  -3,318
  -3,569
Discount rate, %
 
  14.90
  15.65
  16.43
  17.25
  18.11
  19.02
  19.97
  20.97
  22.01
  23.11
  24.27
  25.48
  26.76
  28.10
  29.50
  30.98
  32.52
  34.15
  35.86
  37.65
  39.53
  41.51
  43.59
  45.77
  48.05
  50.46
  52.98
  55.63
  58.41
  61.33
PV of cash for distribution, $m
 
  -594
  679
  528
  396
  285
  196
  126
  74
  36
  12
  -3
  -11
  -14
  -14
  -13
  -10
  -8
  -5
  -4
  -2
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  33.7
  22.3
  14.4
  9.2
  5.8
  3.6
  2.2
  1.4
  0.8
  0.5
  0.3
  0.2
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Walter Investment Management Corp. is a diversified mortgage banking firm focused primarily on the servicing and origination of residential loans, including reverse loans. The Company operates through three segments: Servicing, Originations and Reverse Mortgage. The Servicing segment consists of operations that perform servicing for third-party credit owners of mortgage loans, as well as its own mortgage loan portfolio. The Servicing segment also includes Insurance, and Loans and Residuals businesses. The Originations segment consists of operations that originate and purchase mortgage loans that are intended for sale to third parties. The Reverse Mortgage segment consists of operations which purchases and originates home equity conversion mortgage that are securitized, but remain on the consolidated balance sheet as collateral for secured borrowings.

FINANCIAL RATIOS  of  Walter Investment Management (WAC)

Valuation Ratios
P/E Ratio -0
Price to Sales 0
Price to Book -1.1
Price to Tangible Book
Price to Cash Flow 0.1
Price to Free Cash Flow 0.1
Growth Rates
Sales Growth Rate -21.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -85.3%
Cap. Spend. - 3 Yr. Gr. Rate -42.3%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity -12804.2%
Total Debt to Equity -17816.7%
Interest Coverage -2
Management Effectiveness
Return On Assets -3.1%
Ret/ On Assets - 3 Yr. Avg. -0.8%
Return On Total Capital -17.4%
Ret/ On T. Cap. - 3 Yr. Avg. -7.9%
Return On Equity -213.6%
Return On Equity - 3 Yr. Avg. -83.8%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -44.2%
EBITDA Margin - 3 Yr. Avg. -8.2%
Operating Margin -78.4%
Oper. Margin - 3 Yr. Avg. -40.6%
Pre-Tax Margin -79.3%
Pre-Tax Margin - 3 Yr. Avg. -39.7%
Net Profit Margin -83.7%
Net Profit Margin - 3 Yr. Avg. -37.3%
Effective Tax Rate -5.6%
Eff/ Tax Rate - 3 Yr. Avg. 12.3%
Payout Ratio 0%

WAC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WAC stock intrinsic value calculation we used $996 million for the last fiscal year's total revenue generated by Walter Investment Management. The default revenue input number comes from 2016 income statement of Walter Investment Management. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our WAC stock valuation model: a) initial revenue growth rate of 11.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 14.9%, whose default value for WAC is calculated based on our internal credit rating of Walter Investment Management, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Walter Investment Management.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of WAC stock the variable cost ratio is equal to 134%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for WAC stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 6.1% for Walter Investment Management.

Corporate tax rate of 27% is the nominal tax rate for Walter Investment Management. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the WAC stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for WAC are equal to 155.8%.

Life of production assets of 21.7 years is the average useful life of capital assets used in Walter Investment Management operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for WAC is equal to 50%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $-24 million for Walter Investment Management - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 36.529 million for Walter Investment Management is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Walter Investment Management at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ [$$] Firm Retention Summary: Walter Investment Management Corp.   [Dec-07-17 01:31PM  The Wall Street Journal]
▶ [$$] Mortgage Servicer Walter Investment Files for Bankruptcy   [Dec-01-17 04:24PM  The Wall Street Journal]
▶ Walter Investment reports 3Q loss   [Nov-09-17 06:42PM  Associated Press]
▶ [$$] Companies to Watch - June 5, 2017   [Jun-05-17 11:33AM  The Wall Street Journal]
▶ Tampas worst-performing company moves executive offices out of state   [08:15AM  American City Business Journals]
▶ Walter Investment posts 1Q profit   [06:24AM  Associated Press]
▶ Mortgage Mayhem: New Residential Falls as Ocwen Plummets   [Apr-20-17 04:58PM  Barrons.com]
▶ Tampa mortgage firm stays in-house for new top lawyer   [Apr-17-17 08:00AM  American City Business Journals]
Financial statements of WAC
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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