NEWMARK GROUP, INC. (NMRK) stock intrinsic value fair value estimate & owner earnings analysis

Newmark is a commercial real estate services firm. In 2025 it booked $3.29 billion of revenue: $1.24 billion (38%) from management services, servicing fees and other, $1.00 billion (30%) from leasing and other commissions, and $1.05 billion (32%) from capital markets, which includes arranging financing and property sales. Its GSE/FHA loan servicing portfolio, $75.3 billion at the end of 2025 versus $67.4 billion a year earlier, produces a recurring stream of servicing fees. Operations are primarily in the United States, with additional operations in the United Kingdom, Latin America, Canada, the European Union and Asia. How we measure earnings. We start from operating cash flow and take out three things. First, we strip the swings in loans held for sale, which Newmark originates and quickly sells and which are funded by short-term warehouse borrowings, so they move cash without changing what the business earns. We also strip ordinary changes in receivables, payables, accrued bonuses and lease balances. Second, we subtract equity compensation and the income allocated to partnership units held by employees ($282 million in 2025), which is a real cost paid in ownership rather than cash. Third, we subtract only the part of capital spending needed to keep the business running. One judgement matters a lot here: Newmark advances cash to brokers as forgivable loans and then expenses them over time as a non-cash charge. We treated those cash advances ($220 million in 2025, $212 million in 2024, $243 million in 2023) as a genuine cost of employing producers and did not remove them. In every year from 2018 to 2020 and 2022 to 2025 the cash advanced exceeded the non-cash amortization added back (2021 was roughly even), so this is a persistent drag rather than timing noise. Removing it would lift 2025 owner earnings by about $220 million. The result is very uneven. Owner earnings were about $135 million in 2022, a loss of about $79 million in 2023, about $24 million in 2024 and about $156 million in 2025 (roughly $0.55, negative $0.45, $0.14 and $0.62 per share). Earlier years were negative, but they came from a different business: through 2021 Newmark also recorded income from its Nasdaq earn-out (for example $1.1 billion in 2021), which is non-cash and so does not appear in operating cash flow, and 2021 also carried an unusually large equity compensation charge of $356 million. We therefore measure the business from 2022, after those Nasdaq-related items, and this window contains a strong year (2022), a weak year (2023) and a recovery (2024 to 2025). The middle of those four years is about $79.5 million a year, or about $0.31 per share on the 253 million fully diluted shares reported for 2025. A cross-check: adding net income, depreciation and other non-cash items and subtracting maintenance capital spending gives about $532 million for 2025, versus our $156 million; the entire gap is explained by equity compensation of $282 million plus broker loan advances of $220 million, less the $126 million of loan-sale swings that our measure removes, so the difference is by design and not an unexplained error. One imperfection: the share count reported for 2025 already includes about 70 million partnership units whose income allocation ($31 million) we also deducted, which is slightly conservative. Growth check. Owner earnings rose from about $24 million in 2024 to about $156 million in 2025, a jump we do not extrapolate. All three cases assume no growth from the anchor, because nothing we can point to secures it. Revenue growth is real (first-half 2026 revenue was $1.73 billion versus $1.42 billion a year earlier), but its conversion into owner earnings has been erratic from year to year, so we do not credit it. Bear case, about $0.40 per share. Owner earnings fall back to the 2024 level ($24 million, $0.10 per share) for five years and nothing is credited after that. The named risks are the 2023 experience, when owner earnings were negative, the rising equity compensation and broker loan bill (equity compensation and unit allocations rose from $140 million in 2023 to $282 million in 2025, which included about $21 million of charges tied to units held by Newmark's former Executive Chairman), and $672 million of corporate debt, including $600 million of 7.5% senior notes due January 2029 whose cash interest is already reflected in operating cash flow. Base case, about $2.95 per share. Owner earnings stay at the $79.5 million middle of the 2022 to 2025 window for ten years and then fade evenly to zero over the following ten years. The business has produced $1.9 to $3.3 billion of revenue every year since 2018 and holds a $75 billion servicing book, which is why we credit persistence, but we do not assume a permanent stream because commission-based revenue depends on transaction activity. Bull case, about $5.38 per share. Owner earnings run at about $145 million a year, roughly the average of the two strongest years (2022 and 2025), for ten years, then fade over ten. It requires that the 2025 result is not a one-off, with no growth assumed. We did not include margin expansion, market recovery, acquisitions, or new offices in Europe and Asia, because none is secured or is a demonstrated repeatable process at a level we can measure. Debt is not subtracted from value because owner earnings are already after interest. What could make this wrong. If the broker loan advances slow relative to the amortization, owner earnings would be higher than shown. If revenue keeps growing without a matching rise in compensation and broker loans, results would be stronger than our base case. Conversely, another year like 2023 would leave the shares worth little on this measure. This is a first analysis for this company, so there is no earlier estimate to compare with.