Redwood Trust (NYSE: RWT) and New York Mortgage Trust (NASDAQ:NYMT) are both small-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their analyst recommendations, risk, institutional ownership, valuation, dividends, earnings and profitability.

Earnings and Valuation

This table compares Redwood Trust and New York Mortgage Trust’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Redwood Trust $246.00 million 4.63 $131.25 million $1.58 9.34
New York Mortgage Trust $319.31 million 2.15 $67.55 million $0.50 12.30

Redwood Trust has higher earnings, but lower revenue than New York Mortgage Trust. Redwood Trust is trading at a lower price-to-earnings ratio than New York Mortgage Trust, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Redwood Trust and New York Mortgage Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Redwood Trust 41.62% 9.87% 2.06%
New York Mortgage Trust 20.23% 10.78% 0.74%

Risk & Volatility

Redwood Trust has a beta of 0.91, indicating that its stock price is 9% less volatile than the S&P 500. Comparatively, New York Mortgage Trust has a beta of 1.37, indicating that its stock price is 37% more volatile than the S&P 500.

Dividends

Redwood Trust pays an annual dividend of $1.12 per share and has a dividend yield of 7.6%. New York Mortgage Trust pays an annual dividend of $0.80 per share and has a dividend yield of 13.0%. Redwood Trust pays out 70.9% of its earnings in the form of a dividend. New York Mortgage Trust pays out 160.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Recommendations

This is a summary of recent ratings and target prices for Redwood Trust and New York Mortgage Trust, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Redwood Trust 0 0 2 0 3.00
New York Mortgage Trust 0 4 1 0 2.20

Redwood Trust presently has a consensus target price of $17.00, suggesting a potential upside of 15.18%. New York Mortgage Trust has a consensus target price of $6.19, suggesting a potential upside of 0.61%. Given Redwood Trust’s stronger consensus rating and higher possible upside, equities analysts clearly believe Redwood Trust is more favorable than New York Mortgage Trust.

Institutional and Insider Ownership

85.4% of Redwood Trust shares are held by institutional investors. Comparatively, 37.8% of New York Mortgage Trust shares are held by institutional investors. 2.3% of Redwood Trust shares are held by company insiders. Comparatively, 1.3% of New York Mortgage Trust shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Summary

Redwood Trust beats New York Mortgage Trust on 11 of the 16 factors compared between the two stocks.

About Redwood Trust

Redwood Trust, Inc., through its subsidiaries, focuses on investing in mortgage and other real estate related assets. The Company is engaged in mortgage banking activities. The Company operates through three segments: Residential Investments, Residential Mortgage Banking and Commercial. The Residential Investments segment includes a portfolio of investments in residential mortgage-backed securities (RMBS) retained from its Sequoia securitizations. The Residential Mortgage Banking segment consists of operating a mortgage loan conduit that acquires residential loans from third-party originators for subsequent sale, securitization, or transfer to its investment portfolio. Its Commercial segment consists of investments in multi-family securities and commercial mortgage-backed securities, as well as a remaining commercial loan investment following the sale of the remainder of its commercial mezzanine loan portfolio.

About New York Mortgage Trust

New York Mortgage Trust, Inc. is a real estate investment trust (REIT). The Company is engaged in the business of acquiring, investing in, financing and managing primarily mortgage-related assets and financial assets. The Company’s investment portfolio includes residential mortgage loans, including second mortgages and loans sourced from distressed markets, non-agency residential mortgage-backed securities (RMBS), multi-family commercial mortgage-backed securities, preferred equity and joint venture equity investments in, and mezzanine loans to, owners of multi-family properties, equity and debt securities issued by entities that invest in residential and commercial real estate and agency RMBS. It may acquire and manage various other types of mortgage-related and financial assets, including, without limitation, collateralized mortgage obligations and securities issued by newly originated residential securitizations, including credit sensitive securities from these securitizations.

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