Intrinsic value of Walker&Dunlop - WD

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$46.97

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$46.97

 
Intrinsic value

$1,911

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence* premium content

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

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of WD 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 1.5

 

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, %
  22.86
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  575
  920
  1,421
  2,126
  3,084
  4,351
  5,982
  8,030
  10,544
  13,567
  17,137
  21,280
  26,017
  31,359
  37,311
  43,871
  51,033
  58,785
  67,117
  76,013
  85,461
  95,449
  105,965
  117,003
  128,557
  140,624
  153,208
  166,313
  179,948
  194,125
  208,860
Variable operating expenses, $m
 
  484
  742
  1,105
  1,599
  2,251
  3,091
  4,146
  5,441
  6,999
  8,837
  10,962
  13,402
  16,154
  19,220
  22,599
  26,288
  30,282
  34,574
  39,157
  44,024
  49,169
  54,586
  60,272
  66,223
  72,440
  78,922
  85,673
  92,696
  99,999
  107,590
Fixed operating expenses, $m
 
  88
  90
  93
  95
  97
  100
  102
  105
  107
  110
  113
  116
  119
  122
  125
  128
  131
  134
  137
  141
  144
  148
  152
  156
  159
  163
  168
  172
  176
  180
Total operating expenses, $m
  390
  572
  832
  1,198
  1,694
  2,348
  3,191
  4,248
  5,546
  7,106
  8,947
  11,075
  13,518
  16,273
  19,342
  22,724
  26,416
  30,413
  34,708
  39,294
  44,165
  49,313
  54,734
  60,424
  66,379
  72,599
  79,085
  85,841
  92,868
  100,175
  107,770
Operating income, $m
  186
  348
  589
  928
  1,391
  2,003
  2,791
  3,782
  4,998
  6,461
  8,189
  10,205
  12,499
  15,086
  17,969
  21,147
  24,616
  28,372
  32,409
  36,719
  41,297
  46,136
  51,231
  56,579
  62,178
  68,025
  74,122
  80,473
  87,079
  93,949
  101,089
EBITDA, $m
  297
  504
  825
  1,277
  1,892
  2,705
  3,753
  5,070
  6,686
  8,631
  10,927
  13,593
  16,641
  20,079
  23,910
  28,132
  32,742
  37,732
  43,095
  48,821
  54,903
  61,333
  68,103
  75,208
  82,646
  90,415
  98,516
  106,952
  115,730
  124,857
  134,343
Interest expense (income), $m
  39
  75
  127
  201
  306
  449
  637
  880
  1,184
  1,558
  2,008
  2,539
  3,155
  3,860
  4,655
  5,540
  6,516
  7,581
  8,734
  9,974
  11,297
  12,702
  14,188
  15,752
  17,394
  19,113
  20,908
  22,780
  24,729
  26,757
  28,866
Earnings before tax, $m
  186
  273
  462
  727
  1,085
  1,554
  2,154
  2,902
  3,814
  4,903
  6,181
  7,666
  9,344
  11,227
  13,315
  15,607
  18,101
  20,791
  23,674
  26,745
  30,000
  33,433
  37,043
  40,827
  44,784
  48,912
  53,215
  57,693
  62,350
  67,192
  72,223
Tax expense, $m
  72
  74
  125
  196
  293
  420
  582
  783
  1,030
  1,324
  1,669
  2,070
  2,523
  3,031
  3,595
  4,214
  4,887
  5,614
  6,392
  7,221
  8,100
  9,027
  10,002
  11,023
  12,092
  13,206
  14,368
  15,577
  16,835
  18,142
  19,500
Net income, $m
  114
  199
  338
  531
  792
  1,135
  1,572
  2,118
  2,784
  3,579
  4,512
  5,596
  6,821
  8,195
  9,720
  11,393
  13,214
  15,178
  17,282
  19,524
  21,900
  24,406
  27,042
  29,804
  32,692
  35,706
  38,847
  42,116
  45,516
  49,050
  52,723

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  119
  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
  3,052
  4,694
  7,252
  10,845
  15,736
  22,201
  30,522
  40,969
  53,795
  69,221
  87,432
  108,571
  132,739
  159,995
  190,362
  223,832
  260,370
  299,925
  342,431
  387,821
  436,026
  486,984
  540,640
  596,954
  655,901
  717,471
  781,674
  848,535
  918,100
  990,432
  1,065,611
Adjusted assets (=assets-cash), $m
  2,933
  4,694
  7,252
  10,845
  15,736
  22,201
  30,522
  40,969
  53,795
  69,221
  87,432
  108,571
  132,739
  159,995
  190,362
  223,832
  260,370
  299,925
  342,431
  387,821
  436,026
  486,984
  540,640
  596,954
  655,901
  717,471
  781,674
  848,535
  918,100
  990,432
  1,065,611
Revenue / Adjusted assets
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
Average production assets, $m
  467
  747
  1,154
  1,726
  2,504
  3,533
  4,858
  6,520
  8,562
  11,017
  13,915
  17,279
  21,126
  25,463
  30,296
  35,623
  41,438
  47,734
  54,499
  61,723
  69,394
  77,504
  86,044
  95,006
  104,388
  114,187
  124,405
  135,046
  146,117
  157,629
  169,594
Working capital, $m
  0
  -190
  -294
  -440
  -638
  -901
  -1,238
  -1,662
  -2,183
  -2,808
  -3,547
  -4,405
  -5,385
  -6,491
  -7,723
  -9,081
  -10,564
  -12,169
  -13,893
  -15,735
  -17,690
  -19,758
  -21,935
  -24,220
  -26,611
  -29,109
  -31,714
  -34,427
  -37,249
  -40,184
  -43,234
Total debt, $m
  2,154
  3,622
  5,753
  8,746
  12,820
  18,206
  25,137
  33,839
  44,523
  57,373
  72,543
  90,152
  110,283
  132,988
  158,284
  186,164
  216,600
  249,549
  284,957
  322,767
  362,922
  405,369
  450,065
  496,975
  546,077
  597,366
  650,846
  706,542
  764,489
  824,741
  887,366
Total liabilities, $m
  2,442
  3,910
  6,041
  9,034
  13,108
  18,494
  25,425
  34,127
  44,811
  57,661
  72,831
  90,440
  110,571
  133,276
  158,572
  186,452
  216,888
  249,837
  285,245
  323,055
  363,210
  405,657
  450,353
  497,263
  546,365
  597,654
  651,134
  706,830
  764,777
  825,029
  887,654
Total equity, $m
  610
  784
  1,211
  1,811
  2,628
  3,708
  5,097
  6,842
  8,984
  11,560
  14,601
  18,131
  22,167
  26,719
  31,790
  37,380
  43,482
  50,087
  57,186
  64,766
  72,816
  81,326
  90,287
  99,691
  109,535
  119,818
  130,540
  141,705
  153,323
  165,402
  177,957
Total liabilities and equity, $m
  3,052
  4,694
  7,252
  10,845
  15,736
  22,202
  30,522
  40,969
  53,795
  69,221
  87,432
  108,571
  132,738
  159,995
  190,362
  223,832
  260,370
  299,924
  342,431
  387,821
  436,026
  486,983
  540,640
  596,954
  655,900
  717,472
  781,674
  848,535
  918,100
  990,431
  1,065,611
Debt-to-equity ratio
  3.531
  4.620
  4.750
  4.830
  4.880
  4.910
  4.930
  4.950
  4.960
  4.960
  4.970
  4.970
  4.980
  4.980
  4.980
  4.980
  4.980
  4.980
  4.980
  4.980
  4.980
  4.980
  4.980
  4.990
  4.990
  4.990
  4.990
  4.990
  4.990
  4.990
  4.990
Adjusted equity ratio
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  114
  199
  338
  531
  792
  1,135
  1,572
  2,118
  2,784
  3,579
  4,512
  5,596
  6,821
  8,195
  9,720
  11,393
  13,214
  15,178
  17,282
  19,524
  21,900
  24,406
  27,042
  29,804
  32,692
  35,706
  38,847
  42,116
  45,516
  49,050
  52,723
Depreciation, amort., depletion, $m
  111
  156
  236
  348
  501
  703
  962
  1,288
  1,688
  2,170
  2,738
  3,388
  4,142
  4,993
  5,940
  6,985
  8,125
  9,360
  10,686
  12,102
  13,607
  15,197
  16,871
  18,629
  20,468
  22,390
  24,393
  26,480
  28,650
  30,908
  33,254
Funds from operations, $m
  778
  355
  574
  879
  1,293
  1,837
  2,535
  3,406
  4,472
  5,749
  7,250
  8,984
  10,963
  13,188
  15,660
  18,378
  21,339
  24,537
  27,968
  31,627
  35,507
  39,603
  43,913
  48,433
  53,160
  58,096
  63,240
  68,595
  74,166
  79,958
  85,977
Change in working capital, $m
  19
  -71
  -104
  -146
  -198
  -262
  -338
  -424
  -520
  -626
  -739
  -858
  -981
  -1,106
  -1,232
  -1,358
  -1,482
  -1,605
  -1,725
  -1,842
  -1,956
  -2,067
  -2,177
  -2,285
  -2,392
  -2,498
  -2,605
  -2,713
  -2,822
  -2,935
  -3,050
Cash from operations, $m
  759
  482
  677
  1,025
  1,491
  2,099
  2,872
  3,830
  4,993
  6,375
  7,989
  9,842
  11,944
  14,294
  16,892
  19,736
  22,821
  26,142
  29,693
  33,468
  37,462
  41,671
  46,090
  50,717
  55,552
  60,594
  65,845
  71,308
  76,989
  82,892
  89,027
Maintenance CAPEX, $m
  0
  -92
  -146
  -226
  -338
  -491
  -693
  -952
  -1,278
  -1,679
  -2,160
  -2,728
  -3,388
  -4,142
  -4,993
  -5,940
  -6,985
  -8,125
  -9,360
  -10,686
  -12,102
  -13,607
  -15,197
  -16,871
  -18,629
  -20,468
  -22,390
  -24,393
  -26,480
  -28,650
  -30,908
New CAPEX, $m
  -2
  -280
  -407
  -572
  -778
  -1,029
  -1,324
  -1,663
  -2,041
  -2,455
  -2,898
  -3,364
  -3,846
  -4,338
  -4,833
  -5,327
  -5,815
  -6,295
  -6,765
  -7,224
  -7,672
  -8,110
  -8,539
  -8,963
  -9,382
  -9,799
  -10,218
  -10,641
  -11,071
  -11,512
  -11,965
Cash from investing activities, $m
  -67
  -372
  -553
  -798
  -1,116
  -1,520
  -2,017
  -2,615
  -3,319
  -4,134
  -5,058
  -6,092
  -7,234
  -8,480
  -9,826
  -11,267
  -12,800
  -14,420
  -16,125
  -17,910
  -19,774
  -21,717
  -23,736
  -25,834
  -28,011
  -30,267
  -32,608
  -35,034
  -37,551
  -40,162
  -42,873
Free cash flow, $m
  692
  110
  124
  226
  374
  579
  855
  1,215
  1,673
  2,241
  2,931
  3,749
  4,709
  5,814
  7,067
  8,469
  10,021
  11,722
  13,568
  15,558
  17,688
  19,954
  22,354
  24,883
  27,542
  30,326
  33,237
  36,274
  39,438
  42,730
  46,154
Issuance/(repayment) of debt, $m
  -681
  1,468
  2,131
  2,993
  4,074
  5,386
  6,931
  8,703
  10,684
  12,850
  15,170
  17,609
  20,132
  22,704
  25,296
  27,880
  30,436
  32,949
  35,408
  37,810
  40,155
  42,447
  44,696
  46,910
  49,103
  51,288
  53,481
  55,695
  57,948
  60,252
  62,624
Issuance/(repurchase) of shares, $m
  -9
  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 from financing (excl. dividends), $m  
  -694
  1,468
  2,131
  2,993
  4,074
  5,386
  6,931
  8,703
  10,684
  12,850
  15,170
  17,609
  20,132
  22,704
  25,296
  27,880
  30,436
  32,949
  35,408
  37,810
  40,155
  42,447
  44,696
  46,910
  49,103
  51,288
  53,481
  55,695
  57,948
  60,252
  62,624
Total cash flow (excl. dividends), $m
  -1
  1,578
  2,255
  3,220
  4,448
  5,965
  7,786
  9,918
  12,357
  15,091
  18,100
  21,358
  24,841
  28,518
  32,363
  36,349
  40,457
  44,670
  48,976
  53,368
  57,843
  62,401
  67,049
  71,793
  76,644
  81,615
  86,718
  91,969
  97,385
  102,983
  108,779
Retained Cash Flow (-), $m
  -122
  -293
  -427
  -600
  -817
  -1,080
  -1,390
  -1,745
  -2,142
  -2,576
  -3,041
  -3,530
  -4,036
  -4,552
  -5,071
  -5,589
  -6,102
  -6,606
  -7,099
  -7,580
  -8,050
  -8,510
  -8,961
  -9,404
  -9,844
  -10,282
  -10,722
  -11,166
  -11,617
  -12,079
  -12,555
Prev. year cash balance distribution, $m
 
  119
  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
 
  1,404
  1,827
  2,620
  3,631
  4,885
  6,397
  8,173
  10,215
  12,515
  15,059
  17,828
  20,805
  23,966
  27,291
  30,760
  34,356
  38,065
  41,878
  45,788
  49,792
  53,892
  58,088
  62,389
  66,800
  71,332
  75,996
  80,803
  85,768
  90,903
  96,224
Discount rate, %
 
  8.60
  9.03
  9.48
  9.96
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.42
  27.74
  29.12
  30.58
  32.11
  33.71
  35.40
PV of cash for distribution, $m
 
  1,293
  1,537
  1,996
  2,484
  2,972
  3,424
  3,809
  4,096
  4,265
  4,304
  4,215
  4,009
  3,705
  3,329
  2,909
  2,472
  2,043
  1,643
  1,284
  975
  719
  515
  358
  241
  157
  99
  60
  35
  20
  11
Current shareholders' claim on cash, %
  100
  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
  100.0

Walker & Dunlop, Inc., through its subsidiaries, originates, sells, and services a range of multifamily and other commercial real estate financing products for owners and developers of real estate in the United States. The company offers a range of commercial real estate finance products, including first mortgage, second trust, construction, mezzanine, and bridge/interim loans, as well as supplemental financings through the programs of the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Government National Mortgage Association, and the Federal Housing Administration. It also provides multifamily finance for multifamily, manufactured housing communities, student housing, affordable, and 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. In addition, the company 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. Further, 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. Walker & Dunlop, Inc. was founded in 1937 and is headquartered in Bethesda, Maryland.

FINANCIAL RATIOS  of  Walker&Dunlop (WD)

Valuation Ratios
P/E Ratio 12.2
Price to Sales 2.4
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 1.8
Price to Free Cash Flow 1.8
Growth Rates
Sales Growth Rate 22.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate -16.7%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 353.1%
Total Debt to Equity 353.1%
Interest Coverage 6
Management Effectiveness
Return On Assets 4.2%
Ret/ On Assets - 3 Yr. Avg. 4%
Return On Total Capital 3.8%
Ret/ On T. Cap. - 3 Yr. Avg. 3.6%
Return On Equity 20.8%
Return On Equity - 3 Yr. Avg. 16.9%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 58.4%
EBITDA Margin - 3 Yr. Avg. 55.8%
Operating Margin 32.2%
Oper. Margin - 3 Yr. Avg. 28.1%
Pre-Tax Margin 32.3%
Pre-Tax Margin - 3 Yr. Avg. 28.2%
Net Profit Margin 19.8%
Net Profit Margin - 3 Yr. Avg. 17.2%
Effective Tax Rate 38.7%
Eff/ Tax Rate - 3 Yr. Avg. 38.8%
Payout Ratio 0%

WD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WD stock intrinsic value calculation we used $575 million for the last fiscal year's total revenue generated by Walker&Dunlop. The default revenue input number comes from 2016 income statement of Walker&Dunlop. 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 WD stock valuation model: a) initial revenue growth rate of 60% 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 8.6%, whose default value for WD is calculated based on our internal credit rating of Walker&Dunlop, 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 Walker&Dunlop.
    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 WD stock the variable cost ratio is equal to 53.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $86 million in the base year in the intrinsic value calculation for WD 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 3.5% for Walker&Dunlop.

Corporate tax rate of 27% is the nominal tax rate for Walker&Dunlop. 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 WD 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 WD are equal to 81.2%.

Life of production assets of 5.1 years is the average useful life of capital assets used in Walker&Dunlop 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 WD is equal to -20.7%. 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 - $610 million for Walker&Dunlop - 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 30.871 million for Walker&Dunlop 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 Walker&Dunlop at the current share price and the inputted number of shares is $1.5 billion.


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COMPANY NEWS

▶ Why Walker & Dunlop Inc. Stock Jumped Today   [May-03-17 04:31PM  Motley Fool]
▶ Walker & Dunlop posts 1Q profit   [06:06AM  Associated Press]
▶ Walker & Dunlop Achieves "Top Five" Strategic Goal   [Apr-11-17 04:07PM  PR Newswire]
▶ Three Small Caps to Buy for the Second Quarter   [Apr-05-17 12:35PM  Investopedia]
▶ Walker & Dunlop Named a Best Workplace   [Mar-29-17 06:30AM  PR Newswire]
▶ Walker & Dunlop Maintains Growth Momentum with New Hires   [Mar-21-17 04:07PM  PR Newswire]
▶ Top Stock Picks for the Week of March 20th   [Mar-20-17 03:52PM  Zacks]
▶ Walker & Dunlop Expands HUD Origination Team   [Dec-20-16 05:02PM  PR Newswire]
▶ Walker & Dunlop Expands Investment Sales Platform   [Dec-13-16 06:30AM  PR Newswire]
▶ Is Walker & Dunlop Inc. (WD) Going to Burn These Hedge Funds?   [Dec-12-16 10:06AM  at Insider Monkey]
▶ Walker & Dunlop Completes Acquisition of Elkins Mortgage   [Nov-28-16 05:25PM  PR Newswire]
▶ Local CRE office secures loan for Lane Parke Apartments   [Oct-27-16 04:05PM  at bizjournals.com]
▶ Navy Yard Marriott hotel to add more rooms   [Aug-29-16 11:00AM  at bizjournals.com]
Stock chart of WD Financial statements of WD Annual reports of WD
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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