Intrinsic value of Walker&Dunlop - WD

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$44.84

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$44.84

 
Intrinsic value

$951.80

 
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 1.4

 

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
  47.10
  42.89
  39.10
  35.69
  32.62
  29.86
  27.37
  25.14
  23.12
  21.31
  19.68
  18.21
  16.89
  15.70
  14.63
  13.67
  12.80
  12.02
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
Revenue, $m
  575
  846
  1,209
  1,681
  2,281
  3,025
  3,929
  5,004
  6,262
  7,710
  9,353
  11,194
  13,232
  15,467
  17,896
  20,514
  23,318
  26,303
  29,465
  32,800
  36,305
  39,979
  43,819
  47,827
  52,003
  56,349
  60,870
  65,569
  70,452
  75,527
  80,801
Variable operating expenses, $m
 
  445
  632
  876
  1,185
  1,568
  2,034
  2,588
  3,235
  3,981
  4,828
  5,766
  6,816
  7,968
  9,219
  10,567
  12,012
  13,549
  15,178
  16,896
  18,702
  20,594
  22,573
  24,637
  26,788
  29,027
  31,356
  33,777
  36,292
  38,906
  41,623
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
  533
  722
  969
  1,280
  1,665
  2,134
  2,690
  3,340
  4,088
  4,938
  5,879
  6,932
  8,087
  9,341
  10,692
  12,140
  13,680
  15,312
  17,033
  18,843
  20,738
  22,721
  24,789
  26,944
  29,186
  31,519
  33,945
  36,464
  39,082
  41,803
Operating income, $m
  186
  312
  486
  713
  1,001
  1,360
  1,795
  2,314
  2,922
  3,621
  4,415
  5,315
  6,300
  7,381
  8,556
  9,822
  11,178
  12,623
  14,152
  15,766
  17,462
  19,240
  21,098
  23,038
  25,059
  27,163
  29,350
  31,625
  33,989
  36,445
  38,998
EBITDA, $m
  297
  457
  688
  990
  1,374
  1,851
  2,431
  3,121
  3,929
  4,858
  5,914
  7,097
  8,407
  9,844
  11,405
  13,088
  14,891
  16,810
  18,844
  20,988
  23,243
  25,605
  28,075
  30,653
  33,339
  36,134
  39,042
  42,064
  45,206
  48,470
  51,863
Interest expense (income), $m
  39
  75
  116
  170
  240
  329
  440
  574
  734
  921
  1,137
  1,381
  1,655
  1,958
  2,291
  2,652
  3,041
  3,458
  3,902
  4,373
  4,869
  5,390
  5,937
  6,508
  7,104
  7,725
  8,372
  9,044
  9,743
  10,470
  11,225
Earnings before tax, $m
  186
  237
  370
  543
  761
  1,031
  1,356
  1,740
  2,187
  2,700
  3,278
  3,933
  4,645
  5,423
  6,265
  7,170
  8,137
  9,164
  10,250
  11,393
  12,593
  13,850
  15,162
  16,530
  17,955
  19,437
  20,979
  22,581
  24,245
  25,975
  27,773
Tax expense, $m
  72
  64
  100
  147
  206
  278
  366
  470
  591
  729
  885
  1,062
  1,254
  1,464
  1,692
  1,936
  2,197
  2,474
  2,767
  3,076
  3,400
  3,739
  4,094
  4,463
  4,848
  5,248
  5,664
  6,097
  6,546
  7,013
  7,499
Net income, $m
  114
  173
  270
  396
  556
  752
  990
  1,270
  1,597
  1,971
  2,393
  2,871
  3,391
  3,959
  4,573
  5,234
  5,940
  6,690
  7,482
  8,317
  9,193
  10,110
  11,068
  12,067
  13,107
  14,189
  15,314
  16,484
  17,699
  18,962
  20,274

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
  4,315
  6,166
  8,577
  11,639
  15,436
  20,045
  25,531
  31,949
  39,337
  47,719
  57,110
  67,511
  78,914
  91,304
  104,663
  118,968
  134,198
  150,330
  167,346
  185,230
  203,972
  223,567
  244,014
  265,320
  287,496
  310,559
  334,535
  359,451
  385,344
  412,252
Adjusted assets (=assets-cash), $m
  2,933
  4,315
  6,166
  8,577
  11,639
  15,436
  20,045
  25,531
  31,949
  39,337
  47,719
  57,110
  67,511
  78,914
  91,304
  104,663
  118,968
  134,198
  150,330
  167,346
  185,230
  203,972
  223,567
  244,014
  265,320
  287,496
  310,559
  334,535
  359,451
  385,344
  412,252
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
  687
  981
  1,365
  1,852
  2,457
  3,190
  4,063
  5,085
  6,261
  7,595
  9,089
  10,745
  12,559
  14,531
  16,657
  18,934
  21,358
  23,925
  26,633
  29,480
  32,463
  35,581
  38,835
  42,226
  45,755
  49,426
  53,242
  57,207
  61,328
  65,611
Working capital, $m
  0
  -175
  -250
  -348
  -472
  -626
  -813
  -1,036
  -1,296
  -1,596
  -1,936
  -2,317
  -2,739
  -3,202
  -3,704
  -4,246
  -4,827
  -5,445
  -6,099
  -6,790
  -7,515
  -8,276
  -9,071
  -9,900
  -10,765
  -11,664
  -12,600
  -13,573
  -14,584
  -15,634
  -16,726
Total debt, $m
  2,154
  3,307
  4,849
  6,857
  9,407
  12,570
  16,409
  20,980
  26,326
  32,479
  39,462
  47,285
  55,949
  65,447
  75,768
  86,896
  98,813
  111,499
  124,937
  139,111
  154,009
  169,621
  185,943
  202,976
  220,723
  239,196
  258,408
  278,380
  299,135
  320,703
  343,118
Total liabilities, $m
  2,442
  3,595
  5,137
  7,145
  9,695
  12,858
  16,697
  21,268
  26,614
  32,767
  39,750
  47,573
  56,237
  65,735
  76,056
  87,184
  99,101
  111,787
  125,225
  139,399
  154,297
  169,909
  186,231
  203,264
  221,011
  239,484
  258,696
  278,668
  299,423
  320,991
  343,406
Total equity, $m
  610
  721
  1,030
  1,432
  1,944
  2,578
  3,347
  4,264
  5,336
  6,569
  7,969
  9,537
  11,274
  13,179
  15,248
  17,479
  19,868
  22,411
  25,105
  27,947
  30,933
  34,063
  37,336
  40,750
  44,308
  48,012
  51,863
  55,867
  60,028
  64,352
  68,846
Total liabilities and equity, $m
  3,052
  4,316
  6,167
  8,577
  11,639
  15,436
  20,044
  25,532
  31,950
  39,336
  47,719
  57,110
  67,511
  78,914
  91,304
  104,663
  118,969
  134,198
  150,330
  167,346
  185,230
  203,972
  223,567
  244,014
  265,319
  287,496
  310,559
  334,535
  359,451
  385,343
  412,252
Debt-to-equity ratio
  3.531
  4.590
  4.710
  4.790
  4.840
  4.880
  4.900
  4.920
  4.930
  4.940
  4.950
  4.960
  4.960
  4.970
  4.970
  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
  4.980
  4.980
  4.980
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
  173
  270
  396
  556
  752
  990
  1,270
  1,597
  1,971
  2,393
  2,871
  3,391
  3,959
  4,573
  5,234
  5,940
  6,690
  7,482
  8,317
  9,193
  10,110
  11,068
  12,067
  13,107
  14,189
  15,314
  16,484
  17,699
  18,962
  20,274
Depreciation, amort., depletion, $m
  111
  144
  202
  277
  373
  491
  635
  806
  1,007
  1,237
  1,499
  1,782
  2,107
  2,463
  2,849
  3,266
  3,713
  4,188
  4,691
  5,222
  5,780
  6,365
  6,977
  7,615
  8,280
  8,972
  9,691
  10,440
  11,217
  12,025
  12,865
Funds from operations, $m
  778
  317
  472
  674
  929
  1,244
  1,625
  2,077
  2,604
  3,208
  3,892
  4,654
  5,498
  6,421
  7,423
  8,500
  9,653
  10,878
  12,174
  13,539
  14,974
  16,475
  18,045
  19,682
  21,387
  23,161
  25,006
  26,923
  28,916
  30,987
  33,139
Change in working capital, $m
  19
  -56
  -75
  -98
  -124
  -154
  -187
  -223
  -260
  -300
  -340
  -381
  -422
  -463
  -503
  -542
  -580
  -618
  -655
  -690
  -726
  -760
  -795
  -830
  -864
  -900
  -936
  -973
  -1,011
  -1,051
  -1,092
Cash from operations, $m
  759
  428
  547
  772
  1,053
  1,398
  1,812
  2,299
  2,864
  3,508
  4,232
  5,035
  5,920
  6,884
  7,925
  9,042
  10,233
  11,495
  12,828
  14,230
  15,699
  17,236
  18,840
  20,511
  22,251
  24,061
  25,942
  27,896
  29,927
  32,038
  34,231
Maintenance CAPEX, $m
  0
  -92
  -135
  -192
  -268
  -363
  -482
  -626
  -797
  -997
  -1,228
  -1,489
  -1,782
  -2,107
  -2,463
  -2,849
  -3,266
  -3,713
  -4,188
  -4,691
  -5,222
  -5,780
  -6,365
  -6,977
  -7,615
  -8,280
  -8,972
  -9,691
  -10,440
  -11,217
  -12,025
New CAPEX, $m
  -2
  -220
  -295
  -384
  -487
  -604
  -734
  -873
  -1,021
  -1,176
  -1,334
  -1,495
  -1,655
  -1,815
  -1,972
  -2,126
  -2,277
  -2,424
  -2,567
  -2,708
  -2,846
  -2,983
  -3,119
  -3,254
  -3,391
  -3,529
  -3,671
  -3,816
  -3,966
  -4,121
  -4,283
Cash from investing activities, $m
  -67
  -312
  -430
  -576
  -755
  -967
  -1,216
  -1,499
  -1,818
  -2,173
  -2,562
  -2,984
  -3,437
  -3,922
  -4,435
  -4,975
  -5,543
  -6,137
  -6,755
  -7,399
  -8,068
  -8,763
  -9,484
  -10,231
  -11,006
  -11,809
  -12,643
  -13,507
  -14,406
  -15,338
  -16,308
Free cash flow, $m
  692
  117
  118
  196
  298
  430
  597
  801
  1,046
  1,335
  1,671
  2,051
  2,482
  2,962
  3,491
  4,067
  4,690
  5,359
  6,073
  6,830
  7,631
  8,473
  9,356
  10,280
  11,245
  12,252
  13,299
  14,389
  15,522
  16,700
  17,923
Issuance/(repayment) of debt, $m
  -681
  1,153
  1,542
  2,008
  2,550
  3,163
  3,839
  4,571
  5,346
  6,154
  6,983
  7,823
  8,664
  9,499
  10,321
  11,128
  11,916
  12,686
  13,438
  14,174
  14,898
  15,612
  16,322
  17,032
  17,748
  18,472
  19,212
  19,972
  20,755
  21,568
  22,415
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
  1,153
  1,542
  2,008
  2,550
  3,163
  3,839
  4,571
  5,346
  6,154
  6,983
  7,823
  8,664
  9,499
  10,321
  11,128
  11,916
  12,686
  13,438
  14,174
  14,898
  15,612
  16,322
  17,032
  17,748
  18,472
  19,212
  19,972
  20,755
  21,568
  22,415
Total cash flow (excl. dividends), $m
  -1
  1,270
  1,660
  2,204
  2,848
  3,593
  4,436
  5,371
  6,392
  7,489
  8,653
  9,873
  11,146
  12,461
  13,812
  15,195
  16,606
  18,045
  19,511
  21,005
  22,528
  24,085
  25,678
  27,313
  28,993
  30,724
  32,511
  34,361
  36,277
  38,268
  40,338
Retained Cash Flow (-), $m
  -122
  -230
  -309
  -403
  -511
  -634
  -770
  -916
  -1,072
  -1,234
  -1,400
  -1,568
  -1,737
  -1,904
  -2,069
  -2,231
  -2,389
  -2,543
  -2,694
  -2,842
  -2,987
  -3,130
  -3,272
  -3,415
  -3,558
  -3,703
  -3,852
  -4,004
  -4,161
  -4,324
  -4,494
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
 
  1,159
  1,351
  1,801
  2,337
  2,959
  3,666
  4,455
  5,320
  6,255
  7,253
  8,305
  9,409
  10,557
  11,743
  12,964
  14,218
  15,502
  16,817
  18,163
  19,542
  20,955
  22,406
  23,898
  25,435
  27,021
  28,660
  30,357
  32,116
  33,944
  35,844
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
 
  1,067
  1,136
  1,373
  1,599
  1,800
  1,963
  2,076
  2,133
  2,132
  2,073
  1,964
  1,813
  1,632
  1,432
  1,226
  1,023
  832
  660
  509
  383
  280
  199
  137
  92
  59
  37
  23
  13
  7
  4
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 11.6
Price to Sales 2.3
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 1.7
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 47.1% 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 31.183 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 $1.4 billion.


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COMPANY NEWS

▶ 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
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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