Redwood Trust (NYSE:RWT – Get Free Report) and Arbor Realty Trust (NYSE:ABR – Get Free Report) are both small-cap finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their analyst recommendations, profitability, institutional ownership, dividends, earnings, valuation and risk.
Analyst Recommendations
This is a breakdown of current recommendations and price targets for Redwood Trust and Arbor Realty Trust, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Redwood Trust | 1 | 4 | 5 | 0 | 2.40 |
| Arbor Realty Trust | 4 | 1 | 1 | 0 | 1.50 |
Redwood Trust currently has a consensus price target of $6.54, indicating a potential upside of 23.64%. Arbor Realty Trust has a consensus price target of $8.00, indicating a potential upside of 58.57%. Given Arbor Realty Trust’s higher possible upside, analysts plainly believe Arbor Realty Trust is more favorable than Redwood Trust.
Dividends
Profitability
This table compares Redwood Trust and Arbor Realty Trust’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Redwood Trust | -7.23% | 14.53% | 0.57% |
| Arbor Realty Trust | 12.73% | 8.49% | 1.46% |
Volatility and Risk
Redwood Trust has a beta of 1.37, meaning that its share price is 37% more volatile than the S&P 500. Comparatively, Arbor Realty Trust has a beta of 1.14, meaning that its share price is 14% more volatile than the S&P 500.
Institutional and Insider Ownership
74.3% of Redwood Trust shares are held by institutional investors. Comparatively, 57.3% of Arbor Realty Trust shares are held by institutional investors. 3.3% of Redwood Trust shares are held by insiders. Comparatively, 4.2% of Arbor Realty Trust shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.
Valuation and Earnings
This table compares Redwood Trust and Arbor Realty Trust”s gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Redwood Trust | $115.66 million | 5.72 | -$70.03 million | ($0.78) | -6.78 |
| Arbor Realty Trust | $485.15 million | 2.00 | $148.80 million | $0.39 | 12.94 |
Arbor Realty Trust has higher revenue and earnings than Redwood Trust. Redwood Trust is trading at a lower price-to-earnings ratio than Arbor Realty Trust, indicating that it is currently the more affordable of the two stocks.
Summary
Redwood Trust beats Arbor Realty Trust on 9 of the 17 factors compared between the two stocks.
About Redwood Trust
Redwood Trust, Inc., together with its subsidiaries, operates as a specialty finance company in the United States. The company operates through three segments: Residential Consumer Mortgage Banking, Residential Investor Mortgage Banking, and Investment Portfolio. The Residential Consumer 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 Residential Investor Mortgage Banking segment operates a platform that originates business purpose loans to investors in single-family and multifamily residential properties and bridge loans for subsequent securitization, sale, or transfer into its investment portfolio. The Investment Portfolio segment invests in securities retained from residential consumer and investor securitization activities, and business purpose lending 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 is elected to be taxed as a real estate investment trust (REIT) for federal income tax purposes. Redwood Trust, Inc. was incorporated in 1994 and is headquartered in Mill Valley, California.
About Arbor Realty Trust
Arbor Realty Trust, Inc. invests in a diversified portfolio of structured finance assets in the multifamily, single-family rental, and commercial real estate markets in the United States. The company operates through Structured Business and Agency Business segments. It primarily invests in bridge and mezzanine loans, including junior participating interests in first mortgages, and preferred and direct equity, as well as real estate-related joint ventures, real estate-related notes, and various mortgage-related securities. In addition, the company offers bridge financing products to borrowers who seek short-term capital to be used in an acquisition of property; financing by making preferred equity investments in entities that directly or indirectly own real property; mezzanine financing in the form of loans that are subordinate to a conventional first mortgage loan and senior to the borrower’s equity in a transaction; junior participation financing in the form of a junior participating interest in the senior debt; and financing products to borrowers who are looking to acquire conventional, workforce, and affordable single-family housing. Further, it underwrites, originates, sells, and services multifamily mortgage loans through conduit/commercial mortgage-backed securities programs. The company qualifies as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. Arbor Realty Trust, Inc. was incorporated in 2003 and is headquartered in Uniondale, New York.
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