Starwood Property Trust Inc. Stock Downgraded (STWD)

NEW YORK ( TheStreet) -- Starwood Property (NYSE: STWD) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • STWD's very impressive revenue growth greatly exceeded the industry average of 17.8%. Since the same quarter one year prior, revenues leaped by 95.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.76, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, STARWOOD PROPERTY TRUST INC's return on equity is below that of both the industry average and the S&P 500.
  • STWD is off 6.15% from its price level of one year ago, reflecting the general market trend and ignoring their higher earnings per share compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.

Starwood Property Trust, Inc. engages in originating, investing in, financing, and managing commercial mortgage loans, other commercial real estate debt investments, commercial mortgage-backed securities, and other commercial real estate-related debt investments. The company has a P/E ratio of 13.3, above the average real estate industry P/E ratio of 13.1 and below the S&P 500 P/E ratio of 17.7. Starwood Property has a market cap of $2.3 billion and is part of the financial sector and real estate industry. Shares are up 6.6% year to date as of the close of trading on Tuesday.

You can view the full Starwood Property Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
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