Stock in Focus: Redwood Trust Inc. (RWT)

Company Profile:

edwood Trust, Inc., together with its subsidiaries, operates as a specialty finance company in the United States. The company operates through two segments, Investment Portfolio and Residential Mortgage Banking. The Investment Portfolio segment offers a portfolio of investments in residential mortgage-backed securities retained from Sequoia securitizations, as well as issued by third parties and other credit risk-related investments; and invests directly in residential mortgage loans. The Residential Mortgage Banking segment operates a mortgage loan conduit, which acquires residential loans from third-party originators for sale, securitization, or transfer to investment portfolio. This segment also includes derivative financial instruments to manage risks associated with residential loans. 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 founded in 1994 and is headquartered in Mill Valley, California.

Recent News:

On Sept. 3, 2019, the company announced the upsizing and pricing of its previously announced underwritten public offering. Redwood will sell 12,500,000 shares of its common stock at a public offering price of $16.08 per share, resulting in gross proceeds of $201 million.

Its Board of Directors authorized the declaration of a third quarter regular dividend of $0.30 per share. The third quarter 2019 dividend is payable on September 30, 2019 to stockholders of record on September 16, 2019.

For the second quarter ended June 30, 2019, the company reported GAAP net income was $31 million, or $0.30 per diluted common share. Non-GAAP core earnings were $43 million, or $0.39 per diluted common share.

Fundamental Analysis:

Ninestocks analyzes several different financial aspects: Growth, Profitability, solvency and efficiency.

Growth – Measures the growth of both the company’s income statement and cash flow.

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Profitability – Measures the historical price movement of the stock.

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Solvency – Measures the solvency of the company based on several ratios.

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Efficiency – Measures the strength and historic growth of a company’s return on invested capital.

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Conclusion:

RWT’s strengths can be seen in its better growth, strong profitability and robust efficiency compared with its peers. Technical indicators signal the bullish signs, as there is a bullish crossover in Stochastic oscillator, the MACD is trying to cross back up and the RSI(14) stands at 52.04 with positive bias. We rate Redwood Trust, Inc. (RWT) a STRONG BUY.

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