Is Redwood Trust, Inc. overvalued or undervalued?

As of 30 July 2025, the valuation grade for Redwood Trust, Inc. has moved from very attractive to risky, indicating a significant deterioration in its investment appeal. The company appears to be overvalued, as evidenced by its P/E ratio of 21, which is substantially higher than the negative P/E ratios of its peers, such as Hudson Pacific Properties, Inc. at -5.09 and Redwood's own valuation of -10.27. Additionally, the Price to Book Value stands at 0.64, and the EV to EBITDA ratio is 0.41, both suggesting that the stock may not be justified at its current price.
In comparison to its peers, Redwood Trust, Inc. shows a stark contrast in valuation metrics, with Ellington Financial, Inc. boasting a P/E of 9.73 and a PEG ratio of 1.51, highlighting its more favorable valuation. Furthermore, Redwood's recent stock performance has lagged behind the S&P 500, with a year-to-date return of -7.04% compared to the index's 12.22%, and a one-year return of -24.03% against 17.14% for the S&P 500, reinforcing the notion that the stock is currently overvalued.