Newmark Group, Inc. (NMRK) provides commercial real estate services internationally. The company recently reported its solid fourth-quarter earnings results, beating Street estimates for revenues and adjusted EPS by 10.9% and 18.2%, respectively. It also surpassed the consensus revenue and EPS estimates in each trailing four quarters. Furthermore, it launched Optality, a dynamic portfolio optimization solution to enable enterprises to add flexibility to their office space in real-time.

NMRK expects total revenues and adjusted EBITDA for fiscal 2022 to be between $3 – $3.10 billion and $620 – $650 million, representing a 3% – 7% and 4% – 9% year-over-year increase, respectively. The stock has gained 20.2% over the past six months to close yesterday’s trading session at $15.70. In addition, it is currently trading 17.8% below its 52-week high of $19.10, which it hit on January 3, 2022. Moreover, the red-hot housing market makes its near-term prospects bright.

Here’s what I think could influence NMRK’s performance in the upcoming months:

Robust Financials

NMRK’s revenues increased 63.7% year-over-year to $984.50 million in the fourth quarter, which ended December 31, 2021. The company’s adjusted EBITDA grew 108.9% year-over-year to $225.40 million, while its adjusted earnings came in at $166 million, representing a 119.2% year-over-year increase. Also, its adjusted EPS came in at $0.65, up 124.1% year-over-year.

(Note that NMRK is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.)

Favorable Analyst Estimates

For the fiscal quarter ending March 31, 2022, analysts expect NMRK’s EPS and revenue to grow 20% and 44.1% year-over-year to $0.24 and $586.90 million, respectively. In addition, its EPS is expected to grow at a rate of 10% per annum over the next five years. Moreover, Wall Street analysts expect the stock to hit $17 in the near term, indicating a potential upside of 5.9%.

Lower-than-Industry Valuation

In terms of forward P/S, NMRK’s 0.94x is 86.4% lower than the industry average of 6.89x. Likewise, its forward EV/S of 1.60x is 85.7% lower than the industry average of 11.18x. Moreover, the stock’s forward non-GAAP P/E and EV/EBIT of 8.63x and 8.19x are lower than the industry averages of 44.60x and 39.42x, respectively.

High Profitability

In terms of trailing-12-month gross profit margin, NMRK’s 100% is 48.1% higher than the industry average of 67.54%. Likewise, its trailing-12-month net income margin of 25.83% is 40.3% higher than the industry average of 18.41%. Moreover, the stock’s trailing-12-month ROCE and ROTA of 77.03% and 14.39% are significantly higher than the industry averages of 5.12% and 2.34%, respectively.

POWR Ratings Show Promise

NMRK has an overall rating of B, which equates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. Out of these categories, NMRK has a B grade for Quality, in sync with its higher-than-industry profitability ratios.

The stock has a B grade for Value, in sync with its lower-than-industry valuation ratios. In addition, it has a B grade for Growth, consistent with its revenue and earnings growth estimates.

NMRK also has a B grade for Momentum, consistent with its 20.2% gains over the past nine months and 45.9% returns over the past year.

Beyond what I have stated above, we have also given NMRK grades for Stability and Sentiment. Get all the NMRK ratings here.

NMRK is ranked #7 out of 43 stocks in the Real Estate Services industry.

Bottom Line

NMRK reported impressive fiscal fourth-quarter results despite rising omicron COVID-19 cases. The company is well-positioned to benefit from the strong housing demand. Therefore, NMRK looks undervalued at the current price level, and it could be wise to scoop up its shares now.

How Does Newmark (NMRK) Stack Up Against its Peers?

NMRK has an overall POWR Rating of B. You could also check out these other stocks within the Real Estate Services industry with an A (Strong Buy) or B (Buy) rating: Marcus & Millichap, Inc. (MMI), Jones Lang LaSalle Incorporated (JLL), and Noodles & Company (RMR).

NMRK shares were unchanged in after-hours trading Monday. Year-to-date, NMRK has declined -16.37%, versus a -12.20% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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