Critical Contrast: Redwood Trust (NYSE:RWT) versus HG (OTCMKTS:STLY)

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

Profitability

This table compares Redwood Trust and HG’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%
HG	-3.70%	-1.31%	-0.92%

Volatility and Risk

Redwood Trust has a beta of 1.57, meaning that its stock price is 57% more volatile than the S&P 500. Comparatively, HG has a beta of 0.58, meaning that its stock price is 42% less volatile than the S&P 500.

Institutional & Insider Ownership

74.3% of Redwood Trust shares are held by institutional investors. Comparatively, 1.7% of HG shares are held by institutional investors. 2.5% of Redwood Trust shares are held by company insiders. Comparatively, 36.1% of HG shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Valuation and Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Redwood Trust	$724.00 million	1.18	-$2.27 million	$0.55	11.75
HG	$11.11 million	1.11	-$820,000.00	($0.15)	-28.66

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

Analyst Recommendations

This is a summary of current recommendations and price targets for Redwood Trust and HG, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Redwood Trust	0	4	3	1	2.63
HG	0	0	0	0	0.00

Redwood Trust currently has a consensus price target of $7.84, indicating a potential upside of 21.38%. Given Redwood Trust’s stronger consensus rating and higher probable upside, analysts plainly believe Redwood Trust is more favorable than HG.

Summary

Redwood Trust beats HG on 12 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 HG

HG Holdings, Inc. engages in the title insurance and real estate businesses in the United States. It operates through four segments: Title Insurance Services, Reinsurance, Management Services, and Real Estate. The company provides title insurance, closing and/or escrow, and similar or related services in connection with residential and commercial real estate transactions. It also owns and operates a portfolio of single-tenant properties leased for the occupancy by U.S. government tenant agencies and sub-agencies, such as the Federal Bureau of Investigation, the Department of Veterans affairs, the Drug Enforcement Administration, Immigration & Customs Enforcement, the Social Security Administration, and the Department of Transportation. In addition, the company provides excess-of-loss reinsurance coverage related to catastrophic weather risk in Texas; and management advisory services, such as formation, operational, and restructuring services. The company was formerly known as Stanley Furniture Company, Inc. and changed its name to HG Holdings, Inc. in March 2018. HG Holdings, Inc. was incorporated in 1984 and is headquartered in Charlotte, North Carolina.