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Redwood Trust (RWT)
NYSE:RWT
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Redwood
(NYSE:RWT)
47Neutral
Positive Factors
Investment Potential
Analyst recommends buying due to an attractive 11% yield on an absolute basis.
Market Position
Redwood Trust remains uniquely positioned to capitalize on the evolving mortgage lending landscape by participating in potential future mortgage asset sales from banks.
Valuation
The stock trades at almost a 30% discount to NAV, like several of the resi and commercial mortgage REITs right now.
Negative Factors
Earnings Challenges
Redwood Trust reported a fourth-quarter GAAP net loss of $8.4 million, reflecting challenges in maintaining earnings levels.
Financial Performance
Earnings available for distribution were $0.13 versus $0.18 last quarter.
Market Conditions
Higher rates could create some further pressure on Redwood's NAV, although a steeper yield curve may be more supportive for the mortgage capital flow.
Redwood (RWT) vs. S&P 500 (SPY)
Market Cap
$798.50M
Dividend Yield11.15%
Average Volume (3M)821.95K
Price to Earnings (P/E)18.6
Beta (1Y)1.02
Revenue Growth27.92%
EPS GrowthN/A
CountryUS
Employees283
SectorReal Estate
Sector Strength69
IndustryREIT - Mortgage
Share Statistics
EPS (TTM)0.32
Shares Outstanding132,861,160
10 Day Avg. Volume1,049,688
30 Day Avg. Volume821,948
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.35
Price to Cash Flow (P/CF)-0.30
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$7.84Price Target Upside30.45% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering8
Redwood Business Overview & Revenue Model
Company DescriptionRedwood Trust, Inc., together with its subsidiaries, operates as a specialty finance company in the United States. The company operates through three segments: Residential Mortgage Banking, Business Purpose Mortgage Banking, and Investment Portfolio. The Residential Mortgage Banking segment operates a mortgage loan conduit that acquires residential loans from third-party originators for subsequent sale, securitization, or transfer to its investment portfolio. This segment also offers derivative financial instruments to manage risks associated with residential loans. The Business Purpose Mortgage Banking segment operates a platform that originates and acquires business purpose loans, such as single-family rental and bridge loans for subsequent securitization, sale, or transfer into its investment portfolio. The Investment Portfolio segment invests in securities retained from residential and business purpose securitization activities, and residential and small-balance multifamily bridge loans, as well as residential mortgage-backed securities issued by third parties, Freddie Mac K-Series multifamily loan securitizations and reperforming loan securitizations, servicer advance investments, home equity investments, and other housing-related investments. The company qualifies as a real estate investment trust (REIT) for federal income tax purposes. As a REIT, it intends to distribute at least 90% of its taxable income as dividends to shareholders. Redwood Trust, Inc. was incorporated in 1994 and is headquartered in Mill Valley, California.
How the Company Makes MoneyRedwood Trust, Inc. generates revenue primarily through interest income from its portfolio of mortgage-backed securities and residential and multi-family loans. The company earns money by originating residential loans, which are then sold or securitized, generating origination fees. Additionally, Redwood benefits from the spread between the interest income it receives on its assets and the interest it pays on its liabilities. The company also engages in strategic partnerships within the real estate and mortgage sectors to enhance its product offerings and expand its market reach, contributing to its revenue streams.
Redwood Financial Statement Overview
Summary
Redwood's financials reflect a company undergoing significant transitions. Revenue and profitability improved in the latest year, but historical volatility and cash flow challenges present risks. The elimination of debt by 2024 is positive, but the company's capacity to sustain these improvements is uncertain.Income Statement
The company shows volatile revenue trends with a significant increase in 2024 compared to previous years. Recent gross profit margins are high, but net profit margins have been erratic, reflecting inconsistent profitability. EBIT margins improved sharply in 2024, indicating better operational efficiency, but the absence of EBITDA data limits full margin analysis.45
Neutral
Balance Sheet
The balance sheet shows improvement in stockholders' equity compared to previous years, indicating stability. The debt-to-equity ratio has improved as total debt was eliminated by 2024, reducing financial risk. However, equity remains a small portion of total assets, suggesting potential vulnerabilities.50
Neutral
Cash Flow
The cash flow statement indicates significant fluctuations, with operating cash flow often negative, pointing to cash management issues. Free cash flow remains a concern as it has been negative in several years, although financing activities in 2024 provided substantial cash inflows.30
Negative
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 222.00M | 945.16M | 158.30M | -27.00M | 526.00M | -363.00M | Gross Profit |
| 191.51M | 945.16M | 136.56M | -64.84M | 493.91M | -380.37M | EBIT |
| 531.02M | 808.77M | 1.06M | 408.00M | 338.00M | -587.00M | EBITDA |
| 548.50M | 0.00 | 12.43M | 384.88M | 0.00 | 0.00 | Net Income Common Stockholders |
| 63.00M | 54.00M | -6.27M | -164.00M | 319.61M | -582.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 456.64M | 245.16M | 347.74M | 662.00M | 656.79M | 679.46M | Total Assets |
| 18.26B | 18.26B | 14.50B | 13.03B | 14.71B | 10.36B | Total Debt |
| 16.39B | 16.39B | 12.84B | 11.75B | 13.07B | 9.05B | Net Debt |
| 16.15B | 16.15B | 12.55B | 11.49B | 12.62B | 8.59B | Total Liabilities |
| 17.07B | 17.07B | 13.30B | 11.95B | 13.32B | 9.24B | Stockholders Equity |
| 1.19B | 1.19B | 1.20B | 1.08B | 1.39B | 1.11B |
| Cash Flow | Free Cash Flow | ||||
| -3.53B | -5.86B | -2.02B | -139.14M | -5.69B | -505.47M | Operating Cash Flow |
| -3.53B | -5.86B | -2.02B | -139.14M | -5.69B | -505.47M | Investing Cash Flow |
| 538.09M | 5.72B | 908.72M | 213.89M | 1.40B | 4.07B | Financing Cash Flow |
| 2.96B | 3.27B | 1.15B | -276.87M | 4.28B | -3.31B |
Redwood Technical Analysis
Negative
6.01
Price Trends
6.26
Negative
6.41
Negative
6.57
Negative
Market Momentum
-0.05
Positive
38.74
Neutral
15.59
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RWT, the sentiment is Negative. The current price of 6.01 is below the 20-day moving average (MA) of 6.18, below the 50-day MA of 6.26, and below the 200-day MA of 6.57, indicating a bearish trend. The MACD of -0.05 indicates Positive momentum. The RSI at 38.74 is Neutral, neither overbought nor oversold. The STOCH value of 15.59 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for RWT.
Redwood Risk Analysis
Redwood disclosed 54 risk factors in its most recent earnings report. Redwood reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Redwood Peers Comparison
Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
69 Neutral | $8.72B | 10.24 | 9.58% | 15.13% | 384.69% | 963700.00% | |
68 Neutral | $11.95B | 12.75 | 8.40% | 12.58% | 13.33% | ― | |
62 Neutral | $1.37B | 5.57 | 13.74% | 13.63% | 28.33% | ― | |
61 Neutral | $1.08B | 12.92 | 6.35% | 13.26% | 26.34% | 79.07% | |
61 Neutral | $4.71B | 17.72 | -2.95% | 11.43% | 6.02% | -21.34% | |
51 Neutral | $517.62M | 12.27 | 7.97% | 20.18% | 137.36% | ― | |
47 Neutral | $798.50M | 18.64 | 4.13% | 11.15% | 27.92% | ― |
* Real Estate Sector Average
Performance Comparison
RWT
Redwood
6.01
0.33
5.81%
AGNC
AGNC Investment
9.52
0.96
11.21%
NLY
Annaly Capital
20.66
3.09
17.59%
IVR
Invesco Mortgage
7.93
-0.09
-1.12%
MFA
MFA Financial
10.56
0.34
3.33%
TWO
Two Harbors
13.21
1.74
15.17%
Redwood Earnings Call Summary
Earnings Call Date: Feb 13, 2025 | % Change Since: -4.30% | Next Earnings Date: Apr 24, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted Redwood Trust's strategic progress and strong growth in key platforms like Sequoia and CoreVest, alongside significant dividend increases and reduction in unsecured debt. However, it also underscored challenges such as a decline in GAAP earnings, increased delinquencies in some portfolios, and the impact of elevated mortgage rates. Despite these challenges, the company appears well-positioned for growth in 2025.Highlights
Strong Full-Year Performance
Redwood Trust demonstrated significant progress in 2024, returning operating businesses to strong profitability with a 5.7% total economic return amidst fluctuating treasury yields.
Increased Dividend
The company raised its common stock dividend in each of the final two quarters of 2024.
Strategic Opportunities with Banks
Banks represented 40% of lock volume in 2024, doubling from 2023, indicating a strong build-out of the bank seller network.
Sequoia Platform Growth
Lock volume increased by 4% from the third quarter to $2.3 billion, with January locks totaling over $1 billion, marking a 35% increase compared to Q4's pace.
CoreVest Platform Advancements
Fourth quarter fundings totaled $501 million, up nearly 10% from the third quarter, with a focus on single asset bridge and DSCR loans.
Unsecured Debt Reduction
Convertible debt as a percentage of equity was reduced from 65% to 31% by the end of 2024.
Lowlights
GAAP Earnings Decline
Redwood Trust reported a GAAP loss of $8.4 million for the fourth quarter, compared to a profit of $13.1 million in the third quarter.
Delinquencies in CoreVest Portfolio
90-plus day delinquencies in the CoreVest portfolio increased, particularly in multifamily bridge loans.
Elevated Mortgage Rates
Mortgage rates remained high, hovering around 7%, impacting housing activity and origination growth.
Company Guidance
During the Redwood Trust Fourth Quarter 2024 Financial Results Conference Call, the company provided guidance that emphasized its strategic priorities and financial performance. Redwood Trust reported a 5.7% total economic return for the year amidst volatile interest rates, including three separate 100 basis point swings in treasury yields. The company successfully improved its operating efficiency and increased its common stock dividend in the last two quarters of 2024. Looking forward to 2025, Redwood Trust aims to capitalize on the downsizing of mortgage activity within the banking sector, as banks represented 40% of their lock volume in 2024, doubling from 2023. The company anticipates a 30% plus year-over-year volume increase in its Sequoia segment, targeting a 20% return on capital, and expects CoreVest's volumes to approach $2.5 billion annually. Additionally, Redwood expanded its Aspire platform to tap into the $100 billion addressable market for expanded credit, foreseeing potential 2025 volumes to exceed $2 billion. These initiatives, along with leveraging emerging technologies like AI, are expected to drive profitable growth and expand access to credit for American households.Redwood Corporate Events
Dividends
Redwood Declares Q1 2025 Dividends for Shareholders
Positive
Mar 13, 2025
On March 13, 2025, Redwood Trust, Inc. announced that its Board of Directors declared first quarter 2025 dividends for both common and preferred stock. The common stock dividend of $0.18 per share, consistent with the previous quarter, is payable on March 31, 2025, while the Series A preferred stock dividend of $0.625 per share is payable on April 15, 2025. This decision underscores Redwood’s commitment to providing stable returns to shareholders and highlights its ongoing role in the housing finance sector.
DividendsBusiness Operations and StrategyFinancial Disclosures
Redwood Reports Q4 2024 Loss, Increases Dividend
Neutral
Feb 13, 2025
On February 13, 2025, Redwood Trust announced its financial results for the fourth quarter of 2024, revealing a GAAP net loss of $8.4 million and a decrease in book value per share. Despite the loss, the company saw a 5.9% increase in its quarterly dividend and achieved significant operational milestones, including increased loan distribution and securitization activities through its Sequoia and CoreVest segments. The company also successfully extended its debt maturity profile and enhanced its financing capacity, indicating strategic positioning for future growth in the housing finance market.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.