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Two Harbors (TWO)
NYSE:TWO
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Two Harbors
(NYSE:TWO)
Rating:53Neutral
Price Target:―
Positive Factors
Dividend Yield
The dividend yield is currently at a high and sustainable 15.1%, which is attractive to income-focused investors.
Stock Price Appreciation
The company is positioned for stock price appreciation, with an expected increase of 20.8% towards the price target of $15.
Strategy and Market Conditions
Management believes that the strategy of pairing Agency RMBS with mortgage servicing rights is well-positioned to benefit from market conditions.
Negative Factors
Debt and Leverage
The company might need to take on more debt before year-end to support the maturity of its $260 million convertible bond coming due.
Dividend Cut Potential
The expense may lead to a potential dividend cut to help recalibrate the earnings to fit the lower book value.
Financial Impact
A $200M charge from an adverse judgment in a lawsuit significantly impacted the company's financial results.
Two Harbors (TWO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.04B
Dividend Yield16.99%
Average Volume (3M)2.21M
Price to Earnings (P/E)5.1
Beta (1Y)1.18
Revenue Growth-21.95%
EPS Growth-528.94%
CountryUS
Employees477
SectorReal Estate
Sector Strength54
IndustryREIT - Mortgage
Share Statistics
EPS (TTM)0.28
Shares Outstanding104,132,454
10 Day Avg. Volume2,203,448
30 Day Avg. Volume2,211,241
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)0.00
Price to Sales (P/S)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap10.67
Enterprise Value/Revenue28.35
Enterprise Value/Gross Profit208.40
Enterprise Value/Ebitda41.62
Forecast
1Y Price Target
$10.90Price Target Upside6.45% Upside
Rating ConsensusHold
Number of Analyst Covering8
Two Harbors Business Overview & Revenue Model
Company DescriptionTwo Harbors Investment Corp (TWO) is a real estate investment trust (REIT) that operates in the financial sector, focusing on investing in and managing residential mortgage-backed securities (RMBS), mortgage servicing rights (MSR), and other financial assets. The company aims to generate risk-adjusted returns for its shareholders by managing a portfolio of financial assets that are sensitive to changes in interest rates and other economic factors.
How the Company Makes MoneyTwo Harbors makes money primarily through its investments in residential mortgage-backed securities (RMBS) and mortgage servicing rights (MSR). The company's revenue model relies on generating income from the interest and principal payments of the mortgage loans underlying the RMBS. Additionally, by holding MSRs, Two Harbors earns fees for managing the servicing of mortgage loans. The company strategically manages its portfolio to optimize returns while mitigating risks associated with interest rate fluctuations and prepayment speeds. Two Harbors may also engage in hedging activities to protect against adverse market conditions. Significant partnerships with financial institutions and effective capital management strategies further contribute to its earnings.
Two Harbors Earnings Call Summary
Earnings Call Date:Jul 28, 2025
(Q2-2025)
| % Change Since: -0.87%|
Next Earnings Date:Nov 11, 2025
Earnings Call Sentiment Negative
The earnings call highlighted some positive developments in originations and technology investments, but these were overshadowed by significant losses due to litigation and negative economic returns. The company's increased leverage and comprehensive loss indicate challenges ahead.Q2-2025 Updates
Positive Updates
Increased First Lien Originations
The company funded $48 million UPB in first liens, up from $29 million UPB in the first quarter, marking a 68% increase, which outpaced the nationwide trend of a 16% quarter-over-quarter increase in mortgage originations.
Technology and AI Advancements
Significant investments in AI technologies are being made to improve efficiencies, reduce costs, and enhance customer experiences in servicing and origination businesses. This includes implementing AI in contact centers and exploring conversational AI.
Strategic MSR Market Positioning
The MSR market remains well-supported with bank and nonbank servicers aggressively bidding. The company has been able to seize opportunities in the bulk market despite a 30% year-over-year decline in supply.
Negative Updates
Negative Economic Return
The company experienced a total economic return of negative 14.5% for the second quarter, including a loss contingency accrual of $1.92 per share.
Comprehensive Loss Due to Litigation
A comprehensive loss of $221.8 million or $2.13 per share was incurred, largely due to a $199.9 million loss contingency accrual related to ongoing litigation from the termination of a management agreement.
Increased Leverage
Economic debt-to-equity increased to 7x, partly due to the litigation reserve affecting book value. The company plans to manage this leverage based on market opportunities and capital base.
Company Guidance
During Two's second quarter 2025 earnings call, the company provided detailed guidance on various financial metrics. The total economic return for the second quarter was reported at negative 14.5%, or negative 1.4% excluding a loss contingency accrual of $1.92 per share. This accrual was related to ongoing litigation from the termination of a management agreement, impacting the book value, which decreased to $12.14 per share. The company noted an increase in their economic debt-to-equity ratio to 7x, influenced by the loss contingency. They highlighted the resilience of fixed income and equity markets, with a rebound in Agency RMBS spreads and a record high for the S&P 500. The 10-year U.S. treasury rate settled around 4.62%, with a spread of 51 basis points against the 2-year treasury, indicating a steeper curve. Mortgage origination activity grew significantly, with first lien originations increasing by 68% quarter-over-quarter, and second liens also showing substantial activity. Furthermore, the company is investing in AI technologies to enhance efficiencies, cost reductions, and customer experiences. Looking forward, they anticipate potential rate cuts by the Federal Reserve, which could positively impact RMBS and MSR portfolios.Two Harbors Financial Statement Overview
Summary
Two Harbors demonstrates strong EBIT margins and efficient cash flow generation, indicating operational efficiency. However, inconsistent revenue growth, negative net income, and declining return on equity highlight potential challenges. The balance sheet shows low leverage, but the negative ROE is concerning, emphasizing the need for improved profitability and revenue stabilization.Income Statement
Two Harbors has experienced significant volatility in its revenue, with the TTM showing a substantial decline compared to the previous year. Gross profit margin has remained positive but inconsistent, indicating variable cost management. The EBIT margin is notably high in the TTM, but this is overshadowed by a negative net income, signaling potential issues in non-operational expenses or tax impacts. Overall, while some profitability measures are strong, the inconsistency in revenue and net losses are concerning.45
Neutral
Balance Sheet
The company's financial leverage appears manageable with a low debt-to-equity ratio, suggesting limited reliance on debt financing. However, the equity ratio is modest, indicating a balanced but not overly strong capital structure. Return on Equity (ROE) in the TTM is negative, reflecting the net loss, which is a critical area of concern. Despite a stable asset base, the negative ROE and recent net losses dampen the overall balance sheet health.55
Neutral
Cash Flow
Two Harbors' cash flow demonstrates strong operating cash flows relative to net income, indicating efficient cash generation from core activities. The free cash flow has shown significant growth in the TTM, reflecting improved cash management and capital expenditure control. However, the disparity between operating cash flow and net income suggests potential non-cash charges. Overall, while cash flow generation appears robust, the negative net income raises questions about sustainable profitability.60
Neutral
| Breakdown | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 1.14B | 257.08M | 407.18M | 255.22M | -1.56B |
| Gross Profit | 510.75M | 161.59M | 324.45M | 191.42M | -1.63B |
| EBITDA | 344.75M | 0.00 | 629.18M | 191.42M | -1.67B |
| Net Income | 251.68M | -106.37M | 220.24M | 187.23M | -1.63B |
Balance Sheet | |||||
| Total Assets | 12.20B | 13.14B | 13.47B | 12.11B | 19.52B |
| Cash, Cash Equivalents and Short-Term Investments | 7.88B | 794.83M | 8.46B | 8.32B | 16.04B |
| Total Debt | 9.11B | 1.89B | 1.80B | 1.24B | 965.62M |
| Total Liabilities | 10.08B | 10.94B | 11.28B | 9.37B | 16.43B |
| Stockholders Equity | 2.12B | 2.20B | 2.18B | 2.74B | 3.09B |
Cash Flow | |||||
| Free Cash Flow | 86.88M | 30.87M | -6.41M | -318.64M | 9.20M |
| Operating Cash Flow | 201.00M | 343.51M | 623.40M | 423.51M | 631.60M |
| Investing Cash Flow | 895.28M | -195.78M | -2.75B | 6.31B | 14.90B |
| Financing Cash Flow | -1.07B | -479.40M | 1.17B | -7.30B | -14.51B |
Two Harbors Technical Analysis
Neutral
10.24
Price Trends
10.20
Positive
10.75
Negative
11.04
Negative
Market Momentum
-0.09
Negative
53.95
Neutral
66.44
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TWO, the sentiment is Neutral. The current price of 10.24 is above the 20-day moving average (MA) of 10.04, above the 50-day MA of 10.20, and below the 200-day MA of 11.04, indicating a neutral trend. The MACD of -0.09 indicates Negative momentum. The RSI at 53.95 is Neutral, neither overbought nor oversold. The STOCH value of 66.44 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TWO.
Two Harbors Risk Analysis
Two Harbors disclosed 59 risk factors in its most recent earnings report. Two Harbors 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
Two Harbors Peers Comparison
Overall Rating
UnderperformOutperform
Sector (53)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
69 Neutral | $1.33B | 11.01 | 8.81% | 11.38% | 20.32% | 1.58% | |
66 Neutral | $1.39B | ― | -0.35% | 9.87% | -26.29% | -342.06% | |
60 Neutral | $1.61B | 15.84 | 4.93% | 14.57% | 35.01% | 1115.85% | |
56 Neutral | $1.05B | 16.63 | 5.50% | 13.05% | 1.71% | -56.69% | |
53 Neutral | $1.23B | 2.72 | -2.60% | 5.67% | -2.15% | -149.23% | |
53 Neutral | $1.04B | 5.06 | -14.78% | 16.99% | -21.95% | -528.94% | |
48 Neutral | $1.70B | 8.01 | -2.04% | 18.68% | 157.34% | 91.67% |
* Real Estate Sector Average
Performance Comparison
TWO
Two Harbors
10.24
-1.46
-12.48%
ARI
Apollo Real Estate
10.13
1.00
10.95%
ARR
ARMOUR Residential REIT
15.42
-1.74
-10.14%
DX
Dynex Capital
12.57
2.00
18.92%
EFC
Ellington Financial
13.71
2.26
19.74%
PMT
PennyMac Mortgage
12.26
0.17
1.41%
Two Harbors Corporate Events
Executive/Board Changes
Two Harbors Reappoints William Dellal as CFO
Neutral
Apr 18, 2025
On April 18, 2025, Two Harbors Investment Corp. announced that William Dellal has been appointed as the Vice President and Chief Financial Officer, reversing a previous decision for him to resign on May 5, 2025. There were no changes to Mr. Dellal’s compensatory arrangements in connection with his continued service in this role.
Spark’s Take on TWO Stock
According to Spark, TipRanks’ AI Analyst, TWO is a Neutral.
Two Harbors receives an overall stock score of 62. The company’s significant challenges in revenue generation and cash flow management weigh heavily on its financial performance. Technical analysis shows positive market momentum, though caution is warranted due to overbought signals. Valuation metrics are attractive, indicating potential undervaluation and high dividend yield benefits. The earnings call highlights strategic progress but also underscores current financial difficulties. While the company has potential, addressing its financial challenges is critical for future success.
To see Spark’s full report on TWO stock, click here.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.