Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Walker & Dunlop, Inc. (NYSE:WD), operating in the financial services industry based in United States, saw a significant share price rise of over 20% in the past couple of months on the NYSE. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Walker & Dunlop’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is Walker & Dunlop still cheap?
Good news, investors! Walker & Dunlop is still a bargain right now. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 6.82x is currently well-below the industry average of 15.48x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Walker & Dunlop’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Walker & Dunlop look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, with a negative profit growth of -18% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Walker & Dunlop. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although WD is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to WD, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on WD for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Walker & Dunlop. You can find everything you need to know about Walker & Dunlop in the latest infographic research report. If you are no longer interested in Walker & Dunlop, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.