Redwood Trust (NYSE:RWT – Get Free Report) and Claros Mortgage Trust (NYSE:CMTG – Get Free Report) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, valuation, risk, earnings, analyst recommendations, dividends and institutional ownership.
Insider & Institutional Ownership
74.3% of Redwood Trust shares are held by institutional investors. Comparatively, 89.5% of Claros Mortgage Trust shares are held by institutional investors. 3.3% of Redwood Trust shares are held by insiders. Comparatively, 2.6% of Claros Mortgage Trust shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.
Profitability
This table compares Redwood Trust and Claros Mortgage Trust’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Redwood Trust | 0.42% | 16.02% | 0.57% |
| Claros Mortgage Trust | -354.13% | -19.70% | -6.52% |
Valuation and Earnings
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Redwood Trust | $1.18 billion | 0.40 | -$70.03 million | ($0.04) | -93.12 |
| Claros Mortgage Trust | $187.83 million | 1.00 | -$489.07 million | ($3.83) | -0.35 |
Redwood Trust has higher revenue and earnings than Claros Mortgage Trust. Redwood Trust is trading at a lower price-to-earnings ratio than Claros Mortgage Trust, indicating that it is currently the more affordable of the two stocks.
Risk & Volatility
Redwood Trust has a beta of 1.37, suggesting that its share price is 37% more volatile than the S&P 500. Comparatively, Claros Mortgage Trust has a beta of 1.14, suggesting that its share price is 14% more volatile than the S&P 500.
Analyst Ratings
This is a breakdown of current recommendations and price targets for Redwood Trust and Claros Mortgage Trust, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Redwood Trust | 1 | 4 | 6 | 0 | 2.45 |
| Claros Mortgage Trust | 3 | 1 | 0 | 0 | 1.25 |
Redwood Trust currently has a consensus target price of $5.84, indicating a potential upside of 56.88%. Claros Mortgage Trust has a consensus target price of $2.22, indicating a potential upside of 67.30%. Given Claros Mortgage Trust’s higher possible upside, analysts clearly believe Claros Mortgage Trust is more favorable than Redwood Trust.
Summary
Redwood Trust beats Claros Mortgage Trust on 10 of the 14 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 Claros Mortgage Trust
Claros Mortgage Trust, Inc. operates as a real estate investment trust. It focuses on originating senior and subordinate loans on transitional commercial real estate assets in the United States. The company has elected to be taxed as a real estate investment trust. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to shareholders. The company was incorporated in 2015 and is headquartered in New York, New York.
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