Two Harbors Investments (NYSE:TWO) vs. Rithm Capital (NYSE:RITM) Critical Analysis

Two Harbors Investments (NYSE:TWO) and Rithm Capital (NYSE:RITM) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their dividends, risk, earnings, institutional ownership, analyst recommendations, valuation and profitability.

Earnings & Valuation

This table compares Two Harbors Investments and Rithm Capital”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Two Harbors Investments	$366.65 million	3.49	-$454.30 million	($0.74)	-16.46
Rithm Capital	$4.59 billion	1.18	$681.45 million	$0.60	16.18

Rithm Capital has higher revenue and earnings than Two Harbors Investments. Two Harbors Investments is trading at a lower price-to-earnings ratio than Rithm Capital, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Two Harbors Investments has a beta of 1.04, indicating that its stock price is 4% more volatile than the S&P 500. Comparatively, Rithm Capital has a beta of 1.12, indicating that its stock price is 12% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings and price targets for Two Harbors Investments and Rithm Capital, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Two Harbors Investments	1	6	0	1	2.12
Rithm Capital	0	1	10	0	2.91

Two Harbors Investments presently has a consensus target price of $12.75, indicating a potential upside of 4.68%. Rithm Capital has a consensus target price of $13.15, indicating a potential upside of 35.50%. Given Rithm Capital’s stronger consensus rating and higher probable upside, analysts plainly believe Rithm Capital is more favorable than Two Harbors Investments.

Profitability

This table compares Two Harbors Investments and Rithm Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Two Harbors Investments	-6.09%	12.79%	1.44%
Rithm Capital	9.20%	19.86%	2.84%

Dividends

Two Harbors Investments pays an annual dividend of $0.48 per share and has a dividend yield of 3.9%. Rithm Capital pays an annual dividend of $1.00 per share and has a dividend yield of 10.3%. Two Harbors Investments pays out -64.9% of its earnings in the form of a dividend. Rithm Capital pays out 166.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Two Harbors Investments has increased its dividend for 1 consecutive years.

Insider and Institutional Ownership

64.2% of Two Harbors Investments shares are owned by institutional investors. Comparatively, 44.9% of Rithm Capital shares are owned by institutional investors. 0.7% of Two Harbors Investments shares are owned by insiders. Comparatively, 0.6% of Rithm Capital shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Summary

Rithm Capital beats Two Harbors Investments on 12 of the 18 factors compared between the two stocks.

About Two Harbors Investments

Two Harbors Investment Corp. invests in, finances, and manages mortgage servicing rights (MSRs), agency residential mortgage-backed securities (RMBS), and other financial assets through RoundPoint in the United States. The company target assets include agency RMBS collateralized by fixed rate mortgage loans, adjustable rate mortgage loans, hybrid mortgage loans, or derivatives; and other assets, such as financial and mortgage-related assets, including non-agency securities and non-hedging transactions. It qualifies as a REIT for federal income tax purposes. As a REIT, the company must distribute at least 90% of annual taxable income to its stockholders. Two Harbors Investment Corp. was incorporated in 2009 and is headquartered in St. Louis Park, Minnesota.

About Rithm Capital

Rithm Capital Corp. operates as an asset manager focused on real estate, credit, and financial services. It operates through Origination and Servicing, Investment Portfolio, Mortgage Loans Receivable, and Asset Management segments. Its investment portfolio primarily comprises of mortgage servicing rights (MSR), and MSR financing receivables, title, appraisal and property preservation, excess MSRs, and services advance investments; real estate securities, call rights, SFR properties, and residential mortgage loans; consumer and business purpose loans; and asset management related investments. The company qualifies as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was formerly known as New Residential Investment Corp. and changed its name to Rithm Capital Corp. in August 2022. Rithm Capital Corp. was incorporated in 2011 and is based in New York, New York.