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Why Redwood Trust Is Poised to Outperform

Monday - 8/12/2013, 4:40am  ET

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, mortgage REIT Redwood Trust has earned a respected four-star ranking.

With that in mind, let's take a closer look at Redwood and see what CAPS investors are saying about the stock right now.

Redwood facts

Headquarters (founded)

Mill Valley, Calif. (1994)

Market Cap

$1.6 billion

Industry

Mortgage REITs

Trailing-12-Month Revenue

$156.4 million

Management

CEO Martin Hughes
CFO Christopher Abate

Return on Equity (average, past 3 years)

10.1%

Cash / Debt

$208.0 million / $4.1 billion

Dividend Yield

6%

Competitors

Annaly Capital Management
Capstead Mortgage
iStar Financial

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 77% of the 197 members who have rated Redwood believe the stock will outperform the S&P 500 going forward.   

Just last week, one of those Fools, InveniamViam, succinctly summed up the Redwood bull case for our community:

Very well run REIT. RWT has beaten earnings 6 of the last 6 quarters. They are consistently conservative in their estimates and sell side analysts still have not given them credit for the work they have done improving earnings over the past few years. ...

I expect analyst upgrades and positive revisions to the earnings estimates to come quickly. I believe earnings this year will be close to $2.50 per share. With a very conservative P/E of 10 that would put the target price at $25 (on the low end). Consider that you can also sit and collect the 6% dividend while you wait for the market to [properly] value this issue.

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This article was originally published as Why Redwood Trust Is Poised to Outperformon Fool.com

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