Summary
- Newmark Group’s current valuation multiples are the lowest among its key peers, and its shares have also performed worse than its listed competitors in the past year.
- NMRK’s growing share count and its sub-optimal sales mix explain why its stock is trading at such undemanding valuation multiples.
- My investment rating for NMRK is a Hold; negatives are priced in to a large extent, but positive change will take time.
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Elevator Pitch
I award a Hold investment rating to Newmark Group, Inc.’s (NASDAQ:NMRK) shares. A Hold rating for NMRK is justified as the stock’s valuations are cheap for valid reasons. I will consider upgrading my rating for NMRK to a Buy in the future, if the company’s revenue mix becomes more favorable and its equity-based compensation is reduced significantly.
Company Description
Newmark Group refers to itself as “a leading full-service commercial real estate services business” in the company’s press releases. As per its most recent fiscal year 10-K filing, capital markets, management services, and leasing contributed 32%, 31%, and 29% of NMRK’s full-year FY 2021 top line, respectively. Newmark Group derived the remaining 8% of its sales in 2021 from mortgage banking. Newmark Group also indicated in its FY 2021 10-K filing that the “large majority” of its top line is generated by its home market, the US.
Stock Price Performance And Valuations
NMRK’s share price performance has been disappointing to say the least. In the last year, Newmark Group’s stock price dropped by -42%. The company’s key peers, CBRE Group, Inc. (CBRE), Colliers International Group Inc. (CIGI), Jones Lang LaSalle Incorporated’s (JLL), Cushman & Wakefield plc (CWK) saw their respective share prices decline by -15%, -25%, -28%, and -30%, respectively over the same time period.
