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Walker & Dunlop, Inc. (WD - Snapshot Report) reported phenomenal third quarter results early last month with a triple-digit advance in both adjusted net income and total revenues. Earnings for this commercial real estate financial services company are expected to grow 17.5% in the current year and 16.9% in 2013. A forward P/E multiple of 8.59 and an impressive P/B multiple of 1.09 suggest a promising value proposition for this Zacks #1 Rank (Strong Buy).

Strong Third Quarter

Walker & Dunlop reported solid third quarter results on November 8, as total revenues jumped 110% year over year to $70.1 million. This improvement was primarily due to a 141% increase in loan originations to $1.3 billion and a 52% rise in servicing fee income to $13.3 million. The company expects between $6.7 billion and $7.4 billion of loan originations in 2012 and between $8 billion and $10 billion in 2013. The servicing portfolio reported a 113% year over year growth to an aggregate of $33.9 billion.

Adjusted net income came in at $14.3 million, surpassing the year-ago tally by 135%. On a per share basis, adjusted net income doubled to 56 cents, which exceeded the Zacks Consensus Estimate by 40%.

Surge in Earnings Estimate Revisions

Over the past 30 days, the Zacks Consensus Estimate for 2012 has increased 11.9% to $1.88 as 3 of 4 earnings estimates moved higher, implying a year-over-year increase of 17.5%. The Zacks Consensus Estimate for 2013 has advanced 3.3% to $2.20 over the same time as, again, 3 of 4 earnings estimates moved upward. This outlook represents a year-over-year advance of 16.9%.

Impressive Valuation

Walker & Dunlop looks undervalued with a forward P/E multiple of 8.59 and a P/B multiple of 1.09.

Furthermore, the PEG ratio is 0.74 based on a 5-year EPS growth rate of 11.7%, which is at a 26% discount to the generally-accepted yardstick of 1.0 for a fairly valued stock. This further implies a strong future growth potential for Walker & Dunlop.

Walker & Dunlop is a premier commercial real estate financial services company in the U.S. The company originates, sells and services a wide array of multifamily properties, in addition to offering a range of commercial real estate finance products, including first mortgage loans, second trust loans, supplemental financings, construction loans, mezzanine loans and bridge/interim loans. While the Capital Markets group specializes in financing commercial real estate for owners and investors across the country, the Principal Investments group provides institutional advisory, asset management, and investment management services relating to debt, structured debt and equity. The company currently has a market cap of $562.6 million.

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