Newmark (NMRK)

Real estate services firm Newmark (NASDAQ:NMRK) reported Q1 CY2025 results topping the market’s revenue expectations, with sales up 21.8% year on year to $665.5 million. The company expects the full year’s revenue to be around $3 billion, close to analysts’ estimates. Its non-GAAP profit of $0.21 per share was 12.9% above analysts’ consensus estimates.

Company Overview

Founded in 1929, Newmark (NASDAQ:NMRK) provides commercial real estate services, including leasing advisory, global corporate services, investment sales and capital markets, property and facilities management, valuation and advisory, and consulting.

Technology has been a double-edged sword in real estate services. On the one hand, internet listings are effective at disseminating information far and wide, casting a wide net for buyers and sellers to increase the chances of transactions. On the other hand, digitization in the real estate market could potentially disintermediate key players like agents who use information asymmetries to their advantage.

Newmark’s primary competitors include CBRE (NYSE:CBRE), Jones Lang LaSalle (NYSE:JLL), Cushman & Wakefield (NYSE:CWK), Colliers International (NASDAQ:CIGI), and Marcus & Millichap (NYSE:MMI).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Newmark grew its sales at a sluggish 4.9% compounded annual growth rate. This was below our standard for the consumer discretionary sector and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Newmark’s annualized revenue growth of 5.9% over the last two years is above its five-year trend, but we were still disappointed by the results.

We can dig further into the company’s revenue dynamics by analyzing its three most important segments: Management, Leasing, and Investment Sales, which are 42.7%, 31.3%, and 26.1% of revenue. Over the last two years, Newmark’s revenues in all three segments increased. Its Management revenue (property management) averaged year-on-year growth of 13% while its Leasing (sourcing tenants) and Investment Sales (financial advisory) revenues averaged 5.5% and 13.7%.

This quarter, Newmark reported robust year-on-year revenue growth of 21.8%, and its $665.5 million of revenue topped Wall Street estimates by 8.9%.

Looking ahead, sell-side analysts expect revenue to grow 6.3% over the next 12 months, similar to its two-year rate. This projection is underwhelming and implies its newer products and services will not catalyze better top-line performance yet.

in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Newmark, its EPS declined by 2.7% annually over the last five years while its revenue grew by 4.9%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

In Q1, Newmark reported EPS at $0.21, up from $0.15 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Newmark’s full-year EPS of $1.31 to grow 8.6%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Newmark has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1.2%, lousy for a consumer discretionary business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Newmark historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 2.9%, lower than the typical cost of capital (how much it costs to raise money) for consumer discretionary companies.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, Newmark’s ROIC averaged 1.4 percentage point increases over the last few years. This is a good sign, and we hope the company can continue improving.

Newmark reported $157.1 million of cash and $770.9 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $471 million of EBITDA over the last 12 months, we view Newmark’s 1.3× net-debt-to-EBITDA ratio as safe. We also see its $33.34 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by Newmark’s optimistic full-year EBITDA guidance, which beat analysts’ expectations. We were also excited this quarter's revenue, EPS, and EBITDA outperformed Wall Street’s estimates. Overall, we think this was a solid print with some key areas of upside. The stock traded up 1.9% to $11.25 immediately after reporting.

Updated: May 22, 2025 at 11:07 PM EDT

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Newmark.

Newmark doesn’t pass our quality test. First off, its revenue growth was weak over the last five years. On top of that, Newmark’s relatively low ROIC suggests management has struggled to find compelling investment opportunities, and its cash burn raises the question of whether it can sustainably maintain growth.

Newmark’s P/E ratio based on the next 12 months is 7.4x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $15.17 on the company (compared to the current share price of $10.80).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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