Redwood Trust (RWT) Surges 7.0%: Is This an Indication of Further Gains?

Redwood Trust (RWT) shares soared 7% in the last trading session to close at $5.08. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 7.1% loss over the past four weeks.

The increased investor optimism in the stock can be attributed to the company’s positive preliminary second-quarter business update. The company highlighted record volume in its Aspire mortgage platform, continued operating momentum and plans for a new joint venture.

This specialty finance company is expected to post quarterly FFO of $0.26 per share in its upcoming report, which represents a year-over-year change of +44.4%. Revenues are expected to be $41.73 million, up 202.4% from the year-ago quarter.

While FFO and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in FFO estimate revisions and near-term stock price movements.

For Redwood Trust, the consensus FFO per share estimate for the quarter has been revised 18.2% lower over the last 30 days to the current level. And a negative trend in FFO estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on RWT going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Redwood Trust is part of the Zacks REIT and Equity Trust industry. Altisource Portfolio Solutions (ASPS), another stock in the same industry, closed the last trading session 1.4% higher at $7.15. ASPS has returned 7.6% in the past month.

For Altisource Portfolio, the consensus FFO per share estimate for the upcoming report has remained unchanged over the past month at $0.2. This represents a change of +5.3% from what the company reported a year ago. Altisource Portfolio currently has a Zacks Rank of #3 (Hold).

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This article originally published on Zacks Investment Research (zacks.com).

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