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Redwood
(NYSE:RWT)
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Rating:47Neutral
Price Target:
$3.00
â–¼(-34.92% Downside)
Action:Reiterated
Date:10/14/26
RWT scores below average primarily due to high financial risk from very high leverage and persistently negative operating/free cash flow, alongside declining revenue and uneven profitability. Technical indicators also point to a bearish trend (price below key moving averages and negative MACD), only partially offset by oversold readings. The earnings call provides a meaningful positive counterweight—strong mortgage banking momentum, cost leverage, and legacy portfolio runoff plans—but execution and rate-volatility risks remain, and the very high dividend yield appears more risk-signaling than purely attractive.
Positive Factors
Mortgage banking scale and durable returns
Sustained mortgage banking volume and returns indicate a scalable operating platform with recurring execution strength rather than a single-quarter benefit. Continued production supports fee generation, capital turnover, and competitive positioning across housing-credit markets over the next several quarters.
Negative Factors
Very high and rising leverage
A debt-heavy balance sheet leaves a thin equity cushion when residential credit assets or financing spreads move adversely. Rising leverage can amplify losses, constrain strategic flexibility, and increase dependence on continued funding access, making financial outcomes more sensitive to market conditions.
Read all positive and negative factors
Positive Factors
Negative Factors
Mortgage banking scale and durable returns
Sustained mortgage banking volume and returns indicate a scalable operating platform with recurring execution strength rather than a single-quarter benefit. Continued production supports fee generation, capital turnover, and competitive positioning across housing-credit markets over the next several quarters.
Read all positive factors
Redwood Key Performance Indicators (KPIs)
Any
Net Interest Income by Segment
Measures the net revenue from lending and borrowing activities after funding costs for each segment, the core driver of traditional bank profits. Changes reflect loan growth, rate environment, and funding mix—key for forecasting earnings under different interest-rate scenarios.
Measures the net revenue from lending and borrowing activities after funding costs for each segment, the core driver of traditional bank profits. Changes reflect loan growth, rate environment, and funding mix—key for forecasting earnings under different interest-rate scenarios.
Data provided by:
The Fly
The FlyRedwood (RWT) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$409.50M
Dividend Yield22.09%
Average Volume (3M)4.47M
Price to Earnings (P/E)―
Beta (1Y)0.87
Revenue Growth20.85%
EPS Growth91.76%
CountryUS
Employees351
SectorReal Estate
Sector Strength53
IndustryREIT - Mortgage
Share Statistics
EPS (TTM)-0.02
Shares Outstanding125,612,434
10 Day Avg. Volume2,662,173
30 Day Avg. Volume4,474,225
Financial Highlights & Ratios
PEG Ratio0.03
Price to Book (P/B)0.73
Price to Sales (P/S)0.65
P/FCF Ratio-0.07
Enterprise Value/Market Cap68.03
Enterprise Value/Revenue21.14
Enterprise Value/Gross Profit82.93
Enterprise Value/Ebitda40.84
Forecast
1Y Price Target
$4.92Price Target Upside6.65% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering7
EPS Forecast (FY)0.92
Revenue Forecast (FY)$311.78M
Redwood Business Overview & Revenue Model
Company Description
Redwood Trust, Inc. is a specialized financial enterprise operating across the United States, managing its activities through three distinct divisions. Its Residential Mortgage Banking segment functions as a conduit, sourcing residential home loan...
How the Company Makes Money
Redwood Trust generally makes money by generating net interest income and investment income from mortgage-related assets and related financing activities. Key drivers typically include (a) interest and yield earned on residential mortgage loans an...
Redwood Earnings Call Summary
Earnings Call Date:Jul 28, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Nov 03, 2026
Earnings Call Sentiment Positive
The call outlined solid operating momentum driven by AI-enabled efficiency, strong platform growth (notably Aspire and Sequoia), successful joint-venture distribution expansion, meaningful cost reductions, and improving capital efficiency. These positives were partially offset by continued drag from the legacy investments portfolio (fair-value losses and negative carry), a QoQ decline in non-GAAP EAD per share, and sensitivity of production to rate volatility. Management provided clear plans and progress to reduce legacy allocation and redeploy capital into higher-return mortgage banking activities, which supports a constructive near- to medium-term outlook.Positive Updates
Consistent High Mortgage Banking Volume
Redwood exceeded $8.0 billion of mortgage banking volume for the second straight quarter and executed over 20 securitizations in the first half of 2026. Mortgage banking returns remained above 20% for the 8th consecutive quarter.
Negative Updates
Legacy Investments Drag on Earnings
Legacy investments generated a $23 million GAAP loss in Q2 (including $12 million of negative fair value changes) and a $14 million EAD loss for the quarter. The legacy portfolio continues to impose negative carry and fair-value pressure while being actively wound down.
Read all updates
Q2-2026 Updates
Positive
Negative
Consistent High Mortgage Banking Volume
Redwood exceeded $8.0 billion of mortgage banking volume for the second straight quarter and executed over 20 securitizations in the first half of 2026. Mortgage banking returns remained above 20% for the 8th consecutive quarter.
Read all positive updates
Company Guidance
Management guided that they will continue redeploying capital from the legacy portfolio — which was 12% of capital at 6/30 (down from 15% on 3/31 and 63% YoY) — to below 10% pro forma after a recent transaction and targeted below 5% by year-end, noting each $100 million redeployed could boost consolidated EAD ROE ~200–400 bps; they reiterated mortgage banking durability (8th consecutive quarter of returns north of 20%, operating platforms delivered $34 million of EAD and an 18.5% annualized ROE) and growth targets including driving Aspire from an estimated 5–6% run-rate market share to ~10% by YE2026 (Aspire locked $2.1 billion in Q2, +31% QoQ, 101 bps gain-on-sale, 60+ day delinquencies <10 bps). Management also pointed to continued expense leverage from AI and scale (H1 adjusted expenses = 64 bps of production vs 88 bps in FY2025 with another ~10–15 bps of improvement expected), balance-sheet optionality (recourse debt ~$4.5 billion, 5x leverage; ~$192 million cash; ~$100 million unencumbered assets; $3.7 billion excess warehouse capacity; ~ $1.5 billion secured debt callable in 12 months) and funding cost savings (recent refinancing ~150 bps lower) as enablers of faster capital turnover and higher returns.Redwood Financial Statement Overview
Summary
Income Statement
46
Neutral
Balance Sheet
28
Negative
Cash Flow
17
Very Negative
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.32B | 1.11B | 1.08B | 158.60M | 522.58M | 952.03M |
| Gross Profit | 335.95M | 1.06B | 1.05B | 136.86M | 502.87M | 930.06M |
| EBITDA | 682.17M | 1.07B | 927.31M | 7.82M | 384.88M | 781.62M |
| Net Income | 5.72M | -70.03M | 54.00M | -2.27M | -163.52M | 319.61M |
Balance Sheet | ||||||
| Total Assets | 28.82B | 23.70B | 18.26B | 14.50B | 13.03B | 14.71B |
| Cash, Cash Equivalents and Short-Term Investments | 672.74M | 678.68M | 456.64M | 380.48M | 391.04M | 657.28M |
| Total Debt | 27.47B | 22.16B | 16.39B | 12.84B | 11.50B | 12.88B |
| Total Liabilities | 27.89B | 22.72B | 17.07B | 13.30B | 11.95B | 13.32B |
| Stockholders Equity | 934.00M | 982.62M | 1.19B | 1.20B | 1.08B | 1.39B |
Cash Flow | ||||||
| Free Cash Flow | -14.28B | -10.09B | -5.86B | -2.02B | -139.14M | -5.69B |
| Operating Cash Flow | -14.28B | -10.09B | -5.86B | -2.02B | -139.14M | -5.69B |
| Investing Cash Flow | 5.59B | 4.53B | 2.54B | 908.72M | 213.89M | 1.40B |
| Financing Cash Flow | 8.53B | 5.70B | 3.27B | 1.15B | -276.87M | 4.28B |
Redwood Technical Analysis
Negative
4.61
Price Trends
3.74
Negative
4.19
Negative
4.68
Negative
Market Momentum
-0.17
Negative
44.29
Neutral
92.28
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RWT, the sentiment is Negative. The current price of 4.61 is above the 20-day moving average (MA) of 3.24, above the 50-day MA of 3.74, and below the 200-day MA of 4.68, indicating a neutral trend. The MACD of -0.17 indicates Negative momentum. The RSI at 44.29 is Neutral, neither overbought nor oversold. The STOCH value of 92.28 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for RWT.
Redwood Risk Analysis
Redwood disclosed 55 risk factors in its most recent earnings report. Redwood 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
Redwood Peers Comparison
UnderperformOutperform
Sector (65)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
65 Neutral | $2.17B | 12.19 | 3.79% | 4.94% | 3.15% | 1.96% | |
60 Neutral | $1.51B | 7.16 | 11.87% | 13.29% | 30.22% | 35.19% | |
57 Neutral | $686.39M | 5.14 | 8.23% | 21.21% | 19.70% | 13.45% | |
55 Neutral | $586.64M | 3.41 | 13.99% | 28.62% | 31.49% | 274.62% | |
55 Neutral | $633.96M | 5.05 | 8.88% | 22.01% | 21.86% | 97.23% | |
55 Neutral | $167.84M | 9.15 | 7.31% | 17.70% | 25.55% | -50.15% | |
47 Neutral | $409.50M | -153.05 | 0.59% | 22.09% | 20.85% | 91.76% |
* Real Estate Sector Average
RWT
Redwood
3.26
-1.48
-31.22%
EFC
Ellington Financial
11.74
-0.08
-0.65%
IVR
Invesco Mortgage
5.45
-0.50
-8.46%
MFA
MFA Financial
6.79
-0.84
-11.03%
PMT
PennyMac Mortgage
7.27
-3.27
-31.02%
AOMR
Angel Oak Mortgage
7.23
-0.56
-7.18%
Redwood Corporate Events
Business Operations and StrategyFinancial Disclosures
Redwood Highlights Q3 Capital Strength Amid Rate Volatility
Positive
Oct 13, 2026
Redwood Trust announced that it will release its third quarter 2026 financial results on November 3, 2026, after the close of the New York Stock Exchange, followed by a management webcast and conference call that afternoon. The events will offer i...
Business Operations and StrategyPrivate Placements and Financing
Redwood Trust Completes Convertible Notes Offering and Restructuring
Positive
Sep 15, 2026
On September 15, 2026, Redwood Trust, Inc. completed a private offering of $205 million in 7.00% convertible senior notes due 2030, including full exercise of a $20 million option granted to initial purchasers. The notes, issued under an indenture...
Business Operations and StrategyDividendsPrivate Placements and Financing
Redwood Trust Declares Q3 Dividends and Balance Sheet Actions
Neutral
Sep 10, 2026
On September 10, 2026, Redwood Trust, Inc. announced that its board declared third-quarter 2026 dividends on both common and preferred stock, underscoring management’s commitment to maintaining shareholder returns. The regular common dividen...
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.