Redwood (RWT) AI Stock Analysis

• Market Cap: $757.25M
• Dividend Yield: 12.29%
• Average Volume (3M): 970.72K
• Price to Earnings (P/E): 28.3
• Beta (1Y): 0.90
• Revenue Growth: 31.71%
• EPS Growth: -499.14%
• Country: US
• Employees: 283
• Sector: Real Estate
• Sector Strength: 53
• Industry: REIT - Mortgage
• EPS (TTM): -0.76
• Shares Outstanding: 129,223,460
• 10 Day Avg. Volume: 1,185,914
• 30 Day Avg. Volume: 970,719
• PEG Ratio: -0.04
• Price to Book (P/B): 0.73
• Price to Sales (P/S): 0.86
• P/FCF Ratio: -0.15
• Enterprise Value/Market Cap: 26.61
• Enterprise Value/Revenue: 91.15
• Enterprise Value/Gross Profit: 110.86
• Enterprise Value/Ebitda: 30.23
• 1Y Price Target: $6.38
• Price Target Upside: 8.87% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 6

• Rating: 46 Neutral
• Price Target: $5.50 ▼(-6.14% Downside)

Redwood's overall stock score is primarily impacted by its challenging financial performance, characterized by high leverage and negative cash flows. The technical analysis provides some short-term optimism, but the valuation is hindered by recent losses despite a high dividend yield. The strategic repositioning highlighted in the earnings call offers potential for future improvement, but current financial strains are significant.

Positive Factors

Strategic Transition

The strategic shift towards a simplified model and capital reallocation into high-performing mortgage platforms can enhance long-term profitability and operational efficiency, reducing reliance on legacy assets.

Platform Growth

The growth in Sequoia's loan volume indicates strong demand and effective market positioning, which can drive sustained revenue growth and strengthen Redwood's competitive edge in the mortgage sector.

Share Repurchase Strategy

The aggressive share repurchase strategy reflects management's confidence in the company's intrinsic value and future earnings potential, potentially enhancing shareholder value over the long term.

Negative Factors

High Leverage

High leverage poses financial risk, limiting flexibility and increasing vulnerability to interest rate fluctuations, which could strain cash flows and impact long-term financial health.

Negative Cash Flows

Negative cash flows indicate liquidity challenges and inefficiencies in converting income to cash, potentially hindering Redwood's ability to invest in growth opportunities and meet financial obligations.

Legacy Portfolio Challenges

Losses from legacy investments highlight ongoing challenges in managing non-core assets, which can detract from Redwood's focus on strategic growth areas and impact overall profitability.

Redwood Business Overview & Revenue Model

Company Description

Redwood 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 Money

Redwood Trust, Inc. makes money primarily through the acquisition and management of residential and commercial real estate loans and securities. The company generates revenue from interest income on its portfolio of loans and mortgage-backed securities. Additionally, Redwood Trust earns money through the sale and securitization of mortgage loans, where it packages and sells loans to investors, generating fees and income. The company also benefits from strategic partnerships with financial institutions and other investors to enhance its investment opportunities and revenue streams.

Redwood Financial Statement Overview

Summary

Redwood's financials are challenged by high leverage and negative cash flows. Despite strong gross margins, declining net income and significant debt, coupled with negative operating cash flow, indicate financial instability.

Income Statement

The income statement shows some volatility in revenue and profits. The TTM report indicates a slight decrease in total revenue, with a net profit margin of 16.5% compared to the previous year, which had a net income margin of 22.3%. Historical data reveals fluctuating revenue and profit margins, with a notable revenue growth between 2022 and 2023 but a decline in 2025. The gross profit margin remains high at 84.4%, indicating strong control over cost of sales. However, the declining net income from $54 million to $39.9 million in the TTM suggests challenges in maintaining profitability.

Balance Sheet

The balance sheet reflects a high debt-to-equity ratio of 15.1, indicating significant leverage, which is common in the REIT industry but poses risk if not managed well. The equity ratio has slightly improved over time, moving from 10.7% in 2020 to 5.9% in the latest period, suggesting some stabilization. However, the high level of liabilities relative to equity could stress financial flexibility. Return on equity dropped from 23% in 2021 to 3.4% in the TTM, reflecting reduced efficiency in generating profits from shareholders' equity.

Cash Flow

The cash flow statement highlights concerns with consistently negative operating cash flow, which was -$6.86 billion in the TTM, indicating cash burn from operations. This is partially offset by positive investing and financing cash flows. The free cash flow remains negative, highlighting potential liquidity issues. The operating cash flow to net income ratio is negative, suggesting that reported earnings are not translating into cash, which could be problematic for ongoing operations and sustainability.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	221.05M	998.79M	158.60M	-22.10M	539.60M	-318.03M
Gross Profit	181.76M	965.96M	136.86M	-41.82M	517.62M	-330.76M
EBITDA	666.52M	927.31M	0.00	398.85M	800.74M	-30.75M
Net Income	-74.15M	54.00M	-2.27M	-163.52M	319.61M	-581.85M
Balance Sheet
Total Assets	21.33B	18.26B	14.50B	13.03B	14.71B	10.36B
Cash, Cash Equivalents and Short-Term Investments	302.00M	456.64M	347.74M	388.05M	656.79M	679.46M
Total Debt	19.73B	16.77B	12.84B	11.50B	13.07B	8.85B
Total Liabilities	20.28B	17.07B	13.30B	11.95B	13.32B	9.24B
Stockholders Equity	1.05B	1.19B	1.20B	1.08B	1.39B	1.11B
Cash Flow
Free Cash Flow	-7.01B	-5.86B	-2.02B	-139.14M	-5.69B	-505.47M
Operating Cash Flow	-7.01B	-5.86B	-2.02B	-139.14M	-5.69B	-505.47M
Investing Cash Flow	3.27B	2.54B	908.72M	213.89M	1.40B	4.07B
Financing Cash Flow	3.84B	3.27B	1.15B	-276.87M	4.28B	-3.31B

Redwood Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 5.86
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RWT, the sentiment is Positive. The current price of 5.86 is below the 20-day moving average (MA) of 5.93, above the 50-day MA of 5.81, and above the 200-day MA of 5.71, indicating a neutral trend. The MACD of <0.01 indicates Positive momentum. The RSI at 49.81 is Neutral, neither overbought nor oversold. The STOCH value of 2.40 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for RWT.

Redwood Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
FBRT	73 Outperform	920.66M	11.44	4.55%	12.69%	-3.60%	19.31%
TRTX	67 Neutral	712.03M	13.98	―	10.60%	-12.51%	―
MFA	62 Neutral	990.75M	10.96	―	14.72%	-7.70%	40.36%
KREF	54 Neutral	626.20M	-14.45	―	10.53%	-20.88%	-420.89%
RC	50 Neutral	698.39M	-2.24	-23.71%	17.65%	-34.48%	-373.29%
RWT	46 Neutral	$757.25M	28.34	-6.97%	12.29%	31.71%	-499.14%
Sector *	65 Neutral	$2.17B	12.19	3.79%	4.94%	3.15%	1.96%

Redwood Corporate Events

Redwood Issues $50M Convertible Senior Notes

On August 25, 2025, Redwood Trust, Inc. issued $50 million in 7.75% Convertible Senior Notes due 2027, expanding its existing series of notes originally issued in 2022 and 2024. This issuance increases the total outstanding notes to $297.17 million, providing the company with additional unsecured obligations that rank equally with its other senior unsecured debts. The notes offer conversion options and redemption rights, allowing the company flexibility in managing its financial obligations and maintaining its REIT status, with implications for stakeholders regarding potential conversions and redemptions based on stock performance and market conditions.

Redwood Updates REIT Tax Considerations with SEC

On March 3, 2025, Redwood Trust, Inc. filed a Registration Statement with the SEC, updating its U.S. federal income tax considerations related to its REIT status and securities offerings. The filing includes an opinion from Latham & Watkins LLP confirming Redwood’s compliance with REIT tax requirements since 2011, though future compliance depends on meeting specific operational and ownership criteria. The company aims to maintain its REIT status, which allows it to avoid double taxation by distributing taxable income to shareholders, but it faces potential tax liabilities on undistributed income and certain transactions.

Redwood Announces Q2 2025 Financial Results

On July 30, 2025, Redwood Trust, Inc. announced its financial results for the second quarter of 2025, highlighting an accelerated transition to a scalable operating model and an increased share repurchase authorization to $150 million. The company is reallocating capital from legacy investments to high-performing platforms, aiming to unlock long-term earnings potential and enhance shareholder value, despite reporting a GAAP net loss of $100.2 million for the quarter.

Redwood Declares Q2 2025 Dividends for Shareholders

On June 12, 2025, Redwood Trust, Inc. announced that its Board of Directors declared second quarter 2025 dividends for both common and preferred stock. The common stock dividend remains at $0.18 per share, continuing the company’s long-standing tradition of quarterly dividends, while the Series A preferred stock dividend is set at $0.625 per share. These dividends reflect Redwood’s ongoing commitment to providing stable returns to its shareholders.