Comparing Redwood Trust (RWT) and Five Oaks Investment (OAKS)

Redwood Trust (NYSE: RWT) and Five Oaks Investment (NYSE:OAKS) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their analyst recommendations, risk, profitability, earnings, institutional ownership, valuation and dividends.

Risk and Volatility

Redwood Trust has a beta of 0.92, meaning that its share price is 8% less volatile than the S&P 500. Comparatively, Five Oaks Investment has a beta of 1.31, meaning that its share price is 31% more volatile than the S&P 500.

Profitability

This table compares Redwood Trust and Five Oaks Investment’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%
Five Oaks Investment 7.08% 10.57% 0.47%

Insider & Institutional Ownership

83.9% of Redwood Trust shares are owned by institutional investors. Comparatively, 33.9% of Five Oaks Investment shares are owned by institutional investors. 2.3% of Redwood Trust shares are owned by company insiders. Comparatively, 0.9% of Five Oaks Investment shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Redwood Trust and Five Oaks Investment, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Redwood Trust 0 0 1 0 3.00
Five Oaks Investment 0 2 0 0 2.00

Redwood Trust currently has a consensus price target of $17.00, suggesting a potential upside of 13.18%. Given Redwood Trust’s stronger consensus rating and higher probable upside, research analysts plainly believe Redwood Trust is more favorable than Five Oaks Investment.

Valuation and Earnings

This table compares Redwood Trust and Five Oaks Investment’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Redwood Trust $246.00 million 4.71 $131.25 million $1.58 9.51
Five Oaks Investment $77.03 million 1.18 -$7.98 million $0.40 10.28

Redwood Trust has higher revenue and earnings than Five Oaks Investment. Redwood Trust is trading at a lower price-to-earnings ratio than Five Oaks Investment, indicating that it is currently the more affordable of the two stocks.

Dividends

Redwood Trust pays an annual dividend of $1.12 per share and has a dividend yield of 7.5%. Five Oaks Investment pays an annual dividend of $0.60 per share and has a dividend yield of 14.6%. Redwood Trust pays out 70.9% of its earnings in the form of a dividend. Five Oaks Investment pays out 150.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

Redwood Trust beats Five Oaks Investment on 13 of the 16 factors compared between the two stocks.

Redwood Trust Company Profile

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.

Five Oaks Investment Company Profile

Five Oaks Investment Corp. is a real estate investment trust. The Company is focused on investing on a leveraged basis in mortgage and other real estate-related assets, particularly residential mortgage loans and mortgage-backed securities (MBS). The Company invests in various assets, such as Agency residential MBS (RMBS); securitizations backed by multi-family mortgage loans, or Multi-Family MBS; residential mortgage loans and other mortgage-related investments, including mortgage servicing rights (MSRs), and Non-Agency RMBS. The Company finances its investments in Agency RMBS, Multi-Family MBS, residential mortgage loans and Non-Agency RMBS primarily through short-term borrowings structured as repurchase agreements. The Company is externally managed and advised by Oak Circle Capital Partners LLC.

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