Two Harbors Investments Corp (TWO) and Its Competitors Critical Review

Two Harbors Investments Corp (NYSE: TWO) is one of 44 publicly-traded companies in the “Residential REITs” industry, but how does it compare to its peers? We will compare Two Harbors Investments Corp to similar companies based on the strength of its earnings, dividends, risk, valuation, profitability, analyst recommendations and institutional ownership.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Two Harbors Investments Corp and its peers, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Two Harbors Investments Corp 0 2 3 0 2.60
Two Harbors Investments Corp Competitors 288 1334 1273 36 2.36

Two Harbors Investments Corp presently has a consensus target price of $9.69, indicating a potential downside of 3.80%. As a group, “Residential REITs” companies have a potential upside of 1.15%. Given Two Harbors Investments Corp’s peers higher possible upside, analysts clearly believe Two Harbors Investments Corp has less favorable growth aspects than its peers.

Insider & Institutional Ownership

70.2% of Two Harbors Investments Corp shares are owned by institutional investors. Comparatively, 77.9% of shares of all “Residential REITs” companies are owned by institutional investors. 1.2% of Two Harbors Investments Corp shares are owned by company insiders. Comparatively, 7.1% of shares of all “Residential REITs” companies are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Risk & Volatility

Two Harbors Investments Corp has a beta of 0.59, meaning that its share price is 41% less volatile than the S&P 500. Comparatively, Two Harbors Investments Corp’s peers have a beta of 0.61, meaning that their average share price is 39% less volatile than the S&P 500.

Profitability

This table compares Two Harbors Investments Corp and its peers’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Two Harbors Investments Corp 72.15% 10.26% 1.60%
Two Harbors Investments Corp Competitors 18.26% 4.93% 1.90%

Valuation and Earnings

This table compares Two Harbors Investments Corp and its peers top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue EBITDA Price/Earnings Ratio
Two Harbors Investments Corp $664.12 million N/A 7.04
Two Harbors Investments Corp Competitors $635.77 million $353.96 million 1.04

Two Harbors Investments Corp has higher revenue, but lower earnings than its peers. Two Harbors Investments Corp is trading at a higher price-to-earnings ratio than its peers, indicating that it is currently more expensive than other companies in its industry.

Dividends

Two Harbors Investments Corp pays an annual dividend of $1.04 per share and has a dividend yield of 10.3%. Two Harbors Investments Corp pays out 72.7% of its earnings in the form of a dividend. As a group, “Residential REITs” companies pay a dividend yield of 3.3% and pay out 119.7% of their earnings in the form of a dividend. Two Harbors Investments Corp is clearly a better dividend stock than its peers, given its higher yield and lower payout ratio.

Summary

Two Harbors Investments Corp beats its peers on 8 of the 14 factors compared.

About Two Harbors Investments Corp

Two Harbors Investment Corp. is a real estate investment trust. The Company is focused on investing in, financing and managing residential mortgage-backed securities (RMBS), mortgage servicing rights (MSR), commercial real estate and other financial assets (collectively known as target assets). Its investment objective is to provide attractive risk-adjusted total return to its stockholders over the long-term, primarily through dividends and secondarily through capital appreciation. The Company focuses on managing various associated risks, including interest rate, prepayment, credit, mortgage spread and financing risk. The Company finances its RMBS and commercial real estate assets through short- and long-term borrowings structured as repurchase agreements and advances from the Federal Home Loan Bank of Des Moines, or the FHLB. It also finances its MSR through revolving credit facilities.

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