Redwood Trust: A Stock with Untapped Potential
Stock Analysis & Ideas

Redwood Trust: A Stock with Untapped Potential

Real estate investment trust (REIT) Redwood Trust, Inc. (NYSE: RWT) offers housing credit services. It provides customized housing credit investment options and whole-loan distribution activities. The company has investments in residential, business and multifamily assets.

Last month, the California-based company announced results for the first quarter of 2022. It reported earnings of $0.24 per share, beating the Street’s estimate of $0.15. The figure was, however, lower than the year-ago earnings of $0.72 per share.

Net interest income totaled $53 million, up from $26 million in the first quarter of last year. Net non-interest income plunged to $19 million from $134 million a year ago.

Further, the company deployed $128 million of capital into new investments during the first quarter, and funded business purpose loans of a record $920 million.

It ended the quarter with unrestricted cash of $409 million.

Chris Abate, the CEO of Redwood, said, “These results reflect the diversified nature of our balanced business model with the quality of our investment holdings, mortgage banking platforms and distribution capabilities remaining a clear differentiator.”

Price Target

Based on six Buys, the stock has a Strong Buy consensus rating. RWT’s average price target of $13.58 implies 41.3% upside potential from current levels. Shares have lost 0.5% over the past year.


Despite Redwood losing 28.7% over the past six months and almost 8% during the last three months, I am positive about the stock due to the company’s differentiated business model, strong market position and robust growth plans. The stock has a Smart Score of 8 out of 10, meaning it is likely to outperform the market.

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