Walker & Dunlop (NYSE: WD) and Walter Investment Management Corp. (NYSE:WAC) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, valuation, analyst recommendations, institutional ownership, earnings, dividends and profitabiliy.

Analyst Ratings

This is a summary of current ratings and recommmendations for Walker & Dunlop and Walter Investment Management Corp., as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Walker & Dunlop 0 3 0 0 2.00
Walter Investment Management Corp. 2 1 1 0 1.75

Walker & Dunlop presently has a consensus price target of $28.00, indicating a potential downside of 42.10%. Walter Investment Management Corp. has a consensus price target of $1.42, indicating a potential upside of 50.17%. Given Walter Investment Management Corp.’s higher possible upside, analysts clearly believe Walter Investment Management Corp. is more favorable than Walker & Dunlop.

Risk and Volatility

Walker & Dunlop has a beta of 1.41, suggesting that its stock price is 41% more volatile than the S&P 500. Comparatively, Walter Investment Management Corp. has a beta of 0.77, suggesting that its stock price is 23% less volatile than the S&P 500.

Insider and Institutional Ownership

80.8% of Walker & Dunlop shares are owned by institutional investors. Comparatively, 63.7% of Walter Investment Management Corp. shares are owned by institutional investors. 11.7% of Walker & Dunlop shares are owned by insiders. Comparatively, 50.1% of Walter Investment Management Corp. shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares Walker & Dunlop and Walter Investment Management Corp.’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Walker & Dunlop $630.10 million 2.40 $141.23 million $4.52 10.70
Walter Investment Management Corp. $922.29 million 0.04 -$360.66 million ($9.87) -0.10

Walker & Dunlop has higher revenue, but lower earnings than Walter Investment Management Corp.. Walter Investment Management Corp. is trading at a lower price-to-earnings ratio than Walker & Dunlop, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Walker & Dunlop and Walter Investment Management Corp.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Walker & Dunlop 22.15% 23.87% 5.03%
Walter Investment Management Corp. -30.19% -23.03% -0.43%

Summary

Walker & Dunlop beats Walter Investment Management Corp. on 9 of the 13 factors compared between the two stocks.

Walker & Dunlop Company Profile

Walker & Dunlop, Inc. is a holding company, which conducts its operations through Walker & Dunlop, LLC. The Company provides commercial real estate financial products and services primarily to developers and owners of multifamily properties. The Company originates, sells and services a range of multifamily and other commercial real estate financing products, including Multifamily Finance, Federal Housing Administration (FHA) Finance, Capital Markets, and Proprietary Capital. It originates and sells loans through the programs of the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac, and together with Fannie Mae, the government-sponsored enterprises (GSEs)), the Government National Mortgage Association (Ginnie Mae) and the Federal Housing Administration, a division of the United States Department of Housing and Urban Development (together with Ginnie Mae, HUD).

Walter Investment Management Corp. Company Profile

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.

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