Marcus & Millichap, Inc. (MMI) stock intrinsic value fair value estimate & owner earnings analysis

Marcus & Millichap is a commercial real estate brokerage. At the end of 2025 it had 1,808 investment sales and financing professionals, mostly commission-based independent contractors, working from more than 80 offices in the United States and Canada. It earns commissions on property sales (about $632.5 million of 2025 revenue), fees for arranging financing ($103.9 million) and a small amount of other revenue. Because most costs are commissions paid out as a share of revenue, profits swing sharply with the number of deals closed. Revenue fell from $1.30 billion in 2022 to $646 million in 2023 as higher interest rates froze transactions, then recovered to $755 million in 2025. How we measured earnings. We start with operating cash flow, remove the swings from receivables, payables and bonus timing, and subtract stock compensation (about $24 million a year) and the capital spending needed to keep the offices running. Two judgements matter. First, we did not remove the cost of lease payments: the company adds back non-cash lease expense, so the lease payments are kept as a real cost. Second, we did not treat the loans and advances the company makes to attract brokers as timing items. They are a recurring cost of recruiting producers and the balance stands at roughly $162 million. Removing them would have overstated earnings by tens of millions in the years 2019 to 2022. The result is owner earnings per share of $1.54, $1.62, $2.19, $1.05, $0.31, $3.38, $1.16, $(0.87), $(0.32) and $1.00 for 2016 through 2025. For 2016 to 2018 broker advances were not shown separately and could not be isolated. 2025 benefited from about $29 million of cash coming back from those advances, so it is likely slightly flattering. The anchor. We use the median of the full ten years, about $1.10 per share (roughly $43 million). Ten years captures a complete cycle: the 2021 boom, the 2023 and 2024 losses, and the 2016 to 2019 period. Revenue in 2025 is close to its 2019 level, so the business is similar in scale to the period being averaged. Growth check: owner earnings moved from $(0.32) in 2024 to $1.00 in 2025, which is not a meaningful growth rate off a negative base, and the base case assumes no growth in the first year from the $1.10 anchor. Base case, about $18 per share. Owner earnings stay at roughly $1.10 per share indefinitely, discounted at 6%. We credit no growth. Deal volumes rising, recruiting more brokers (up 5.6% in 2025) and financing volume up 31.2% are all real but depend on the property market, which is not something we can point to as secured, so we leave them out. What supports the level itself is the demonstrated record: owner earnings were positive in eight of the last ten years and the median of that record is $1.10. Bear case, about $5 per share. Transactions stay near the depressed 2023 to 2025 pace, when owner earnings averaged about zero across the three years. We assume just $0.30 per share a year continues indefinitely. Continued broker advances and stock compensation of about $24 million absorb most of the profit. The company has almost no borrowings, with cash interest paid under $1 million a year, so debt is not the risk here. Ongoing litigation, for which a reserve was recorded at the end of 2025, is a further drag. Bull case, about $33 per share. Owner earnings return to about $2.00 per share, the level reached in 2016 to 2019 (range $1.05 to $2.19, peak $2.19 in 2018). First-half 2026 results point in that direction: revenue was $374.4 million versus $317.3 million a year earlier, and the company earned $0.8 million versus a $15.5 million loss. That is only two quarters, so we do not move the base case on it. We stop short of the 2021 level of $3.38 as a boom year. What would make this wrong: continued commission compression or broker departures to competitors, a much larger appetite for advances to recruit brokers, and a prolonged period of high interest rates keeping deal volume low. Some cash flow lines, such as the timing of deferred commissions in 2021, swung widely and could not be fully explained from the filings. Margin-of-safety price. Commission-based revenue is highly cyclical, so the margin-of-safety price is set at roughly half of the base value, about $9 per share, which is still well above the bear case.