Ready Capital Corp (NYSE: RC)

Sector: Real Estate Industry: REIT - Mortgage CIK: 0001527590
Market Cap 377.28 Mn
P/B 0.21
P/E -1.15
P/S -12.96
ROIC (Qtr) -2.33
Div Yield % 28.57
Rev 1y % (Qtr) -12.20
Total Debt (Qtr) 6.13 Bn
Debt/Equity (Qtr) 3.45

About

Ready Capital Corp (RC), a prominent player in the real estate finance industry, is a multi-strategy company that originates, acquires, finances, and services various types of loans and real estate-related investments. These include LMM loans, SBA loans, residential mortgage loans, construction loans, and others, with the primary goal of providing attractive risk-adjusted returns to its stockholders through dividends and capital appreciation. The company operates in two main segments: LMM Commercial Real Estate and Small Business Lending. The LMM...

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Price action

Investment thesis

Bull case

  • Operating cash flow of 472.04M provides exceptional 61.54x coverage of minority interest expenses 7.67M, showing strong core operations.
  • Operating cash flow of 472.04M provides strong 63.05x coverage of stock compensation 7.49M, indicating sustainable incentive practices.
  • Strong operating cash flow of 472.04M provides 3.16x coverage of SG&A expenses 149.46M, showing efficient operational cost management.
  • Strong free cash flow of 472.04M provides 172.47x coverage of acquisition spending 2.74M, indicating disciplined M&A strategy.
  • Cash position of 192M provides exceptional 25.03x coverage of minority interest expenses 7.67M, indicating strong liquidity.

Bear case

  • Operating cash flow of 472.04M barely covers its investment activities of 1.82B, with a coverage ratio of 0.26, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 472.04M provides thin coverage of dividend payments of (135.32M) with a -3.49 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Operating cash flow of 472.04M provides minimal -5.91x coverage of tax expenses of (79.86M), suggesting potential tax planning inefficiencies or unsustainable tax positions.
  • Operating earnings of (398.73M) show weak coverage of depreciation charges of 1.10M, with a -362.48 ratio indicating high capital intensity and potential reinvestment needs.
  • Free cash flow of 472.04M represents just -0.23x of debt issuance (2.04B), suggesting concerning reliance on leverage rather than internal cash generation for growth.

Peer comparison

Companies in the REIT - Mortgage
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 NLY Annaly Capital Management Inc 13.98 Bn 10.42 8.17 107.02 Bn
2 AGNC AGNC Investment Corp. 11.44 Bn 16.65 30.74 95.01 Bn
3 STWD Starwood Property Trust, Inc. 6.55 Bn 17.88 3.63 21.43 Bn
4 RITM Rithm Capital Corp. 5.78 Bn 7.43 1.16 34.97 Bn
5 BXMT Blackstone Mortgage Trust, Inc. 3.36 Bn 31.37 6.62 15.46 Bn
6 ARR Armour Residential REIT, Inc. 1.83 Bn 34.78 15.64 16.56 Bn
7 DX Dynex Capital Inc 1.59 Bn 9.04 6.88 11.75 Bn
8 ABR Arbor Realty Trust Inc 1.50 Bn 9.84 2.84 10.40 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.86 0.83
EV to Cash from Ops. EV/CFO 15.24 -102.96
EV to Debt EV to Debt 1.17 1.31
EV to EBIT EV/EBIT -18.05 -260.73
EV to EBITDA EV/EBITDA -25.06 -16.37
EV to Free Cash Flow [EV/FCF] EV/FCF 15.24 3.47
EV to Market Cap EV to Market Cap 18.98 9.18
EV to Revenue EV/Rev -247.27 26.77
Price to Book Value [P/B] P/B 0.21 0.68
Price to Earnings [P/E] P/E -1.16 -4.85
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) -2.28 -0.55
Dividend Payout Ratio % Div Payout % (Qtr) -33.20 29.47
Dividend per Basic Share Div per Share (Qtr) 0.63 1.15
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 21.66 57.60
Interest Coverage Interest Coverage 0.00 -0.17
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 0.00 37.60
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -9.71 24.22
Dividend Growth (1y) % Div 1y % (Qtr) -45.65 4.53
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -170.57 17.83
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -104.42 9.86
EBIT Growth (1y) % EBIT 1y % (Qtr) -91.00 20.98
EBT Growth (1y) % EBT 1y % (Qtr) -91.00 11.17
EPS Growth (1y) % EPS 1y % (Qtr) -129.27 59.25
FCF Growth (1y) % FCF 1y % (Qtr) 118.53 59.63
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -124.29 20.65
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.00 0.04
Cash Payout Ratio Cash Payout (Qtr) 0.29 0.83
Cash Ratio Cash Ratio 0.00 0.00
Current Ratio Current Ratio 0.00 0.00
Debt to Equity Ratio Debt/Equity (Qtr) 3.45 5.05
Interest Cover Ratio Interest Cover Ratio 0.00 -0.17
Times Interest Earned Times Interest Earned 0.00 -0.17
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 1,366.40 137.11
EBIT Margin % EBIT Margin % (Qtr) 1,370.16 142.19
EBT Margin % EBT Margin % (Qtr) 1,370.16 129.16
Gross Margin % Gross Margin % (Qtr) 100.00 117.97
Net Profit Margin % Net Margin % (Qtr) 1,123.20 125.89