Analyzing Redwood Trust (NYSE:RWT) & Net Lease Office Properties (NYSE:NLOP)

Net Lease Office Properties (NYSE:NLOP) 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 profitability, earnings, risk, dividends, analyst recommendations, institutional ownership and valuation.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Net Lease Office Properties and Redwood Trust, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Net Lease Office Properties	0	0	1	0	3.00
Redwood Trust	0	4	3	1	2.63

Net Lease Office Properties presently has a consensus target price of $46.00, suggesting a potential upside of 47.55%. Redwood Trust has a consensus target price of $7.84, suggesting a potential upside of 18.75%. Given Net Lease Office Properties’ stronger consensus rating and higher possible upside, research analysts plainly believe Net Lease Office Properties is more favorable than Redwood Trust.

Valuation and Earnings

This table compares Net Lease Office Properties and Redwood Trust”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Net Lease Office Properties	$174.96 million	2.63	-$131.75 million	N/A	N/A
Redwood Trust	$724.00 million	1.21	-$2.27 million	$0.55	12.01

Redwood Trust has higher revenue and earnings than Net Lease Office Properties.

Institutional and Insider Ownership

58.3% of Net Lease Office Properties shares are held by institutional investors. Comparatively, 74.3% of Redwood Trust shares are held by institutional investors. 2.5% of Redwood Trust shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Volatility and Risk

Net Lease Office Properties has a beta of 0.86, suggesting that its share price is 14% less volatile than the S&P 500. Comparatively, Redwood Trust has a beta of 1.57, suggesting that its share price is 57% more volatile than the S&P 500.

Profitability

This table compares Net Lease Office Properties and Redwood Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Net Lease Office Properties	-122.90%	-30.16%	-17.58%
Redwood Trust	9.35%	6.01%	0.43%

Summary

Redwood Trust beats Net Lease Office Properties on 10 of the 13 factors compared between the two stocks.

About Net Lease Office Properties

Net Lease Office Properties (NYSE: NLOP) is a publicly traded real estate investment trust with a portfolio of 59 high-quality office properties, totaling approximately 8.7 million leasable square feet primarily leased to corporate tenants on a single-tenant net lease basis. The vast majority of the office properties owned by NLOP are located in the U.S., with the balance in Europe. The portfolio consists of 62 corporate tenants operating in a variety of industries, generating annualized based rent (ABR) of approximately $145 million. NLOP's business plan is to focus on realizing value for its shareholders primarily through strategic asset management and disposition of its property portfolio over time. Given WPC's extensive knowledge of the portfolio, NLOP is externally managed and advised by wholly owned affiliates of WPC to successfully execute on its business strategy. Over the course of its 50-year history, WPC has developed significant expertise in the single-tenant office real estate sector, including the operation, leasing, acquisition and development of assets through many market cycles, and has a proven track record of execution.

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.