Critical Analysis: Redwood Trust (NYSE:RWT) vs. Ashford Hospitality Trust (NYSE:AHT)

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

Institutional & Insider Ownership

74.3% of Redwood Trust shares are held by institutional investors. Comparatively, 41.0% of Ashford Hospitality Trust shares are held by institutional investors. 2.5% of Redwood Trust shares are held by insiders. Comparatively, 1.2% of Ashford Hospitality Trust shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Redwood Trust and Ashford Hospitality Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Redwood Trust	9.35%	6.01%	0.43%
Ashford Hospitality Trust	2.84%	-12.89%	1.01%

Dividends

Redwood Trust pays an annual dividend of $0.68 per share and has a dividend yield of 9.5%. Ashford Hospitality Trust pays an annual dividend of $0.24 per share and has a dividend yield of 2.9%. Redwood Trust pays out 123.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ashford Hospitality Trust pays out -1.9% of its earnings in the form of a dividend.

Earnings and Valuation

This table compares Redwood Trust and Ashford Hospitality Trust”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Redwood Trust	$724.00 million	1.31	-$2.27 million	$0.55	13.07
Ashford Hospitality Trust	$1.22 billion	0.04	-$178.49 million	($12.89)	-0.65

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

Volatility & Risk

Redwood Trust has a beta of 1.59, suggesting that its share price is 59% more volatile than the S&P 500. Comparatively, Ashford Hospitality Trust has a beta of 2.33, suggesting that its share price is 133% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current recommendations and price targets for Redwood Trust and Ashford Hospitality Trust, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Redwood Trust	0	3	5	1	2.78
Ashford Hospitality Trust	0	0	0	0	0.00

Redwood Trust currently has a consensus price target of $8.19, indicating a potential upside of 13.97%. Given Redwood Trust’s stronger consensus rating and higher possible upside, research analysts clearly believe Redwood Trust is more favorable than Ashford Hospitality Trust.

Summary

Redwood Trust beats Ashford Hospitality Trust on 13 of the 17 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 Ashford Hospitality Trust

Ashford Hospitality Trust, Inc., together with its subsidiaries (Ashford Trust), is a real estate investment trust (REIT). While our portfolio currently consists of upscale hotels and upper upscale full-service hotels, our investment strategy is predominantly focused on investing in upper upscale full-service hotels in the United States that have revenue per available room (RevPAR) generally less than twice the U.S. national average, and in all methods including direct real estate, equity, and debt. We currently anticipate future investments will predominantly be in upper upscale hotels. We own our lodging investments and conduct our business through Ashford Hospitality Limited Partnership (Ashford Trust OP), our operating partnership. Ashford OP General Partner LLC, a wholly owned subsidiary of Ashford Trust, serves as the sole general partner of our operating partnership.