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Two Harbors (TWO)
NYSE:TWO
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Two Harbors
(NYSE:TWO)
53Neutral
Positive Factors
Dividend
The company has a high-yielding and apparently sustainable dividend, yielding 14.5% annualized.
Stock Price Appreciation
The company is positioned for stock price appreciation, with an expected increase of 20.8% towards the price target of $15.
Total Return
The stock is expected to have a 20.8% price appreciation, contributing to an estimated 12-month total return of about 35%.
Negative Factors
Unrealized Marks
Results were negatively impacted by large unrealized marks on residential mortgage-backed securities due to interest rate volatility.
Two Harbors (TWO) vs. S&P 500 (SPY)
Market Cap
$1.23B
Dividend Yield15.16%
Average Volume (3M)1.87M
Price to Earnings (P/E)5.1
Beta (1Y)1.30
Revenue Growth-18.22%
EPS Growth-114.40%
CountryUS
Employees477
SectorReal Estate
Sector Strength79
IndustryREIT - Mortgage
Share Statistics
EPS (TTM)0.24
Shares Outstanding104,025,090
10 Day Avg. Volume1,703,052
30 Day Avg. Volume1,867,118
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.00
Price to Cash Flow (P/CF)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap9.91
Enterprise Value/RevenueN/A
Enterprise Value/Gross Profit23.96
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$13.15Price Target Upside10.88% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering6
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 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 | EBIT |
| 344.75M | 108.72M | 549.39M | 191.42M | -1.67B | EBITDA |
| 344.75M | 0.00 | 629.18M | 191.42M | -1.67B | Net Income Common Stockholders |
| 251.68M | -106.37M | 220.24M | 187.23M | -1.63B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 7.88B | 794.83M | 8.46B | 8.32B | 16.04B | Total Assets |
| 12.20B | 13.14B | 13.47B | 12.11B | 19.52B | Total Debt |
| 1.28B | 1.89B | 1.80B | 1.24B | 965.62M | Net Debt |
| 777.82M | 1.16B | 1.12B | 88.51M | -419.14M | 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 |
| 0.00 | -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
11.86
Price Trends
12.42
Negative
12.01
Negative
11.93
Negative
Market Momentum
-0.08
Negative
50.66
Neutral
50.43
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 11.86 is above the 20-day moving average (MA) of 11.35, below the 50-day MA of 12.42, and below the 200-day MA of 11.93, indicating a neutral trend. The MACD of -0.08 indicates Negative momentum. The RSI at 50.66 is Neutral, neither overbought nor oversold. The STOCH value of 50.43 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 (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
66 Neutral | $1.32B | ― | 0.41% | 11.59% | -14.98% | 95.53% | |
65 Neutral | $1.23B | 9.69 | 9.45% | 11.98% | 11.91% | 52.26% | |
60 Neutral | $1.31B | 15.74 | 6.01% | 13.78% | 73.74% | -34.10% | |
60 Neutral | $2.95B | 11.32 | 0.26% | 8508.24% | 6.34% | -14.00% | |
53 Neutral | $1.23B | 5.06 | 0.63% | 15.16% | -18.22% | -114.40% | |
51 Neutral | $1.12B | 13.87 | 6.36% | 12.38% | -4.42% | -43.99% | |
48 Neutral | $1.33B | 8.01 | -0.11% | 17.75% | 142.18% | 50.74% |
* Real Estate Sector Average
Performance Comparison
TWO
Two Harbors
11.86
0.45
3.94%
ARI
Apollo Real Estate
9.46
0.52
5.82%
ARR
ARMOUR Residential REIT
16.16
-0.35
-2.12%
DX
Dynex Capital
12.16
1.49
13.96%
EFC
Ellington Financial
12.90
2.55
24.64%
PMT
PennyMac Mortgage
12.83
-0.33
-2.51%
Two Harbors Earnings Call Summary
Earnings Call Date:Apr 28, 2025
(Q1-2025)
| % Change Since: -1.17%|
Next Earnings Date:Jul 30, 2025
Earnings Call Sentiment Neutral
The earnings call presented a balanced outlook with positive economic returns and book value growth. However, challenges such as increased operating expenses, market volatility, and limited recapture opportunities offset some achievements.Q1-2025 Updates
Positive Updates
Positive Economic Return
Generated a total economic return of 4.4% for the first quarter, with both RMBS and MSR contributing positively.
Book Value Increase
Book value increased to $14.66 per share at March 31 from $14.47 on December 31, resulting in a positive 4.4% quarterly economic return.
Comprehensive Income Growth
Generated comprehensive income of $64.9 million or $0.62 per weighted average common share in the first quarter.
Stable MBS Funding
MBS funding markets remained stable with repurchase spreads normalizing at SOFR plus around 20 basis points.
Strategic Portfolio Management
Decreased mortgage exposure by 30% and reduced leverage to manage risk effectively.
Negative Updates
Increased Operating Expenses
Operating expenses increased due to higher non-cash equity compensation expenses, typical in the first quarter.
Volatile Market Conditions
Experienced volatility in interest rates and spreads, influenced by economic uncertainty and policy changes.
Limited Recapture Opportunities
Organic recapture from direct-to-consumer channel remains low due to only 0.5% of the portfolio being refinanceable.
Challenges in MSR Market
Faced with increased competition in the MSR market, impacting prepayment speeds and return potential.
Company Guidance
In Two's first quarter 2025 earnings call, the company reported a total economic return of 4.4%, with RMBS and MSR contributing positively to these results. The interest rates for 2-year and 10-year U.S. Treasury notes decreased by 36 basis points, ending the quarter at 3.88% and 4.21%, respectively. The company's book value increased to $14.66 per share, up from $14.47 at the end of 2024, with a common stock dividend of $0.45, resulting in a positive quarterly economic return of 4.4%. Comprehensive income for the quarter was $64.9 million or $0.62 per weighted average common share. Two's economic debt-to-equity ratio decreased to 6.2 times, with a portfolio of $14.6 billion, including $11.6 billion in settled positions and $3 billion in TBAs. The static return estimate was projected between 9.1% to 14.7%, considering the current portfolio allocations and leverage adjustments.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
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
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.