Redwood Trust (NYSE:RWT) & Bimini Capital Management (OTCMKTS:BMNM) Critical Analysis

Bimini Capital Management (OTCMKTS:BMNM) and Redwood Trust (NYSE:RWT) are both small-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, risk, analyst recommendations, dividends, valuation, earnings and profitability.

Institutional & Insider Ownership

74.3% of Redwood Trust shares are owned by institutional investors. 45.8% of Bimini Capital Management shares are owned by company insiders. Comparatively, 3.3% of Redwood Trust shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Risk and Volatility

Bimini Capital Management has a beta of 0.16, suggesting that its share price is 84% less volatile than the S&P 500. Comparatively, Redwood Trust has a beta of 1.37, suggesting that its share price is 37% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and price targets for Bimini Capital Management and Redwood Trust, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bimini Capital Management	0	0	0	0	0.00
Redwood Trust	1	4	5	0	2.40

Redwood Trust has a consensus target price of $6.39, suggesting a potential upside of 42.57%. Given Redwood Trust’s stronger consensus rating and higher probable upside, analysts clearly believe Redwood Trust is more favorable than Bimini Capital Management.

Valuation and Earnings

This table compares Bimini Capital Management and Redwood Trust”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bimini Capital Management	$16.89 million	1.40	$5.80 million	$0.60	3.90
Redwood Trust	$115.66 million	4.85	-$70.03 million	($0.78)	-5.75

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

Profitability

This table compares Bimini Capital Management and Redwood Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bimini Capital Management	32.69%	56.67%	5.19%
Redwood Trust	-7.23%	14.53%	0.57%

About Bimini Capital Management

Bimini Capital Management, Inc., through its subsidiaries, operates as a specialty finance company in the United States. The company operates in two segments, Asset Management and Investment Portfolio. The Asset Management segment includes investment advisory services by Bimini Advisors to Orchid Island Capital, Inc. and Royal Palm Capital, LLC. The Investment Portfolio segment engages in investment activities conducted by Royal Palm Capital, LLC. It invests in residential mortgage-backed securities. The company was formerly known as Opteum Inc. and changed its name to Bimini Capital Management, Inc. in September 2007. Bimini Capital Management, Inc. was founded in 2003 and is based in Vero Beach, Florida.

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.