Here’s 1 Housing Market Stock That’s Great Long-Term Value
Market sell-offs are no fun for long-term investors, but they are necessary for healthy markets – and they can provide investors with opportunities to invest in stellar companies at excellent prices.
One such company is the multi-family housing lender Walker and Dunlop (WD 1.95%)whose shares are down 28% since the start of the year. Walker & Dunlop has proven itself with exceptional growth over the past decade, and its recent moves could set it up for another decade of success.
Walker & Dunlop is a leading multi-family housing lender
Walker & Dunlop finance apartment buildings and multi-unit houses. It’s one of the best in the game, and last year was the largest lender of its kind in the United States when it comes to loans funded by Fannie Mae.
Walker & Dunlop stands out for its impressive growth in the multifamily lending space. He focused on scaling the business in the early 2010s, and by 2020 he had diversified the business to generate multiple streams of income.
Walker & Dunlop grew the total dollar amount of financing it provided for multifamily and other home loans — its transaction volume — at an impressive compound annual growth rate (CAGR) of 32% over the past decade. . This fueled revenue and net income growth from 2011 to 2021, with revenue growing at a CAGR of 24% and diluted earnings per share (EPS) growing at a CAGR of 18%.
Tailwinds could help it gain market share
Walker & Dunlop released another excellent quarterly earnings report in the first quarter, with total trading volume up 40% from the first quarter to $12.7 billion. Its revenue increased 42% from a year ago to $319 million, while diluted EPS increased 18%.
Most loans in the multifamily space tend to be shorter terms of up to 10 years, with a lump sum payment at the end of the loan. Rather than pay this lump sum, most borrowers choose to refinance their loan at the end of the term. Walker & Dunlop management highlighted the tailwinds for the business in the years to come, as the company calls it a “wave of deadlines”. There will be hundreds of billions of dollars in multi-family loans maturing in the next five years, which Walker & Dunlop seeks to fund and grow its market share.
However, Walker & Dunlop is not sitting around waiting for this wave of deadlines. The company has spent a significant amount of cash on acquiring businesses to fuel the next phase of growth. The company bought Alliant Capital for nearly $700 million at the end of 2021, one of the largest acquisitions in its history. The deal gives Walker & Dunlop, already the fifth-largest affordable housing lender in the United States, an even stronger presence in this sector, which should help it reach its goal of generating $60 billion in loans. affordable housing over the next five years. He also expects Alliant to be an immediate positive contributor, adding $90-100 million in annual revenue while adding $0.45-0.60 in diluted EPS.
A cheap price for the fast growing business
Walker & Dunlop is a well run lender that has done an excellent job of growing its business. Under CEO Willy Walker, the company has generated outstanding returns of 896% over the past decade, beating the 280% return of the S&P 500 during the same time.
However, the stock was beaten with the wider market, and it fell almost 29%. year to date. After seeing its price-to-earnings (P/E) ratio peak at 18.7 last year, Walker & Dunlop now trades at 12.5 times earnings.
Although this is on par with its 10-year average P/E, the stock has recorded excellent growth and is well positioned to continue to gain market share. As long as Walker & Dunlop continues to execute on its vision, it should be a solid stock to buy and hold for the next decade.