Commercial real estate (CRE) finance company Walker & Dunlop (NYSE: WD) has grown tremendously since third-generation CEO Willy Walker took the reins over a decade ago. But management doesn't plan to pump the brakes on growth just yet. Here's a look at where Walker & Dunlop aims to be in five years -- and why I'm inclined to believe they'll get there.
Walker & Dunlop's five-year goals
We don't need to speculate where Walker & Dunlop thinks it will be in five years, as the company released its five-year growth plan (Drive to '25) late last year. To put it mildly, Walker & Dunlop has some ambitious growth targets.
On the top line, Walker & Dunlop aims to increase its revenue from about $1.1 billion in 2020 to at least $1.7 billion by 2025. And on the bottom line, the company sees earnings per share rising from their 2020 level of $7.69 to $13 to $15. Here's how it plans to achieve this:
- Increase the debt financing volume from less than $35 billion in 2020 to more than $60 billion in 2025.
- Grow the mortgage-servicing portfolio from about $107 billion at the end of last year to $160 billion by the end of 2025.
- Develop the property sales side of the business dramatically by more than quadrupling it from $6.1 billion in sales last year to over $25 billion in 2025.
- Establish commercial real estate investment banking capabilities and grow this area of the business to more than $10 billion under management.
Why I believe management
These are ambitious goals, and if Walker & Dunlop can achieve them, it would make the company the market leader in several categories of commercial real estate finance.
It's important for investors to realize that this isn't the first time Walker & Dunlop has aimed high. In fact, the company released its 2020 goals back in 2015, so we have a track record on which to judge managements' ability to achieve its goals. Here's a rundown of how Walker & Dunlop did:
- The company set a goal to achieve more than $1 billion in revenue by 2020 -- that's more than double what it generated in 2015. And last year, the company made nearly $1.1 billion in revenue.
- Walker & Dunlop's 2020 goal called for over $30 billion in debt financing volume. It shattered this goal, attaining nearly $35 billion.
- In 2015, the servicing portfolio, which generates reliable recurring income, was just over $50 billion in size, and Walker & Dunlop aimed to double it to $100 billion by the end of 2020. It ended the year with $107.2 billion of mortgages in the portfolio.
- Perhaps the most ambitious goal, Walker & Dunlop aimed to grow its property sales volume from $1.5 billion in 2015 to more than $8 billion by 2020. Unfortunately, this goal fell short, but with $6.1 billion in sales, this side of the business more than quadrupled from 2015 levels.
In a nutshell, Walker & Dunlop has a history of setting very ambitious goals for itself -- and achieving most of them.
The Millionacres bottom line
Obviously, there is a ton of execution risk involved with some of these targets. And as the company gets larger, it will become more difficult to continue to reach its ambitious goals. However, Walker & Dunlop has a strong history of growing through both acquisitions and organically.
And even with the disruption of the COVID-19 pandemic, the company reached most of its previous five-year goals. The bottom line is that while there is no way to know for sure where Walker & Dunlop will be in five years, my instinct is that they'll be right around where their 2025 goals suggest.