STWD

We rate STARWOOD PROPERTY TRUST, INC. (STWD) as Avoid with a composite score of 36.5/100 at a current price of $17.69. The stock falls in the bottom quintile of our universe across key quantitative factors, and the multi-factor weakness suggests a high probability of continued underperformance.

The rating is primarily driven by strength in stability (78th percentile) and investment (38th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (25th percentile) and value (27th percentile) tempers our overall conviction. We assign a No Moat rating (14/100), High uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; balance sheet deleveraging progress; valuation compression risk if growth disappoints. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

STARWOOD PROPERTY TRUST, INC. holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 36.5/100 places it at rank #3963 in our full 7,333-stock universe. At $7.1B in market capitalization, STARWOOD PROPERTY TRUST, INC. is a mid-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -0% combined with momentum at the 30th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 0% (-76.5pp vs sector) narrow to operating margins of 2% (-15.4pp vs sector) and net margins of 22.4%, yielding a gross-to-net conversion rate of N/A%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $17.69, STARWOOD PROPERTY TRUST, INC. is trading at a premium to fundamental value. Our value factor score of 27/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 16.6x (a 39% premium to the sector median of 11.9x), EV/EBITDA of 81.3x (at a premium), P/B of 0.9x, P/S of 3.6x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a High uncertainty rating to STARWOOD PROPERTY TRUST, INC.. Key risk factors include significant leverage (763% debt-to-equity), weak quality scores (25th percentile), low beta of 0.65 — while defensive, this may indicate limited upside participation in bull markets. The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: significant leverage (763% debt-to-equity); weak quality scores (25th percentile); low beta of 0.65 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 78th percentile and quality factor at the 25th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (78th percentile) suggests predictable business dynamics; a 9.91% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate STARWOOD PROPERTY TRUST, INC.'s capital allocation as Poor. Key concerns include elevated leverage (763% D/E), weak asset returns (ROA 0.7%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — STARWOOD PROPERTY TRUST, INC. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, STARWOOD PROPERTY TRUST, INC. receives a Avoid rating with a composite score of 36.5/100 (rank #3963 of 7,333). Our quantitative framework assigns a No Moat (14/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 40/100.

Our analysis does not support a constructive view on STARWOOD PROPERTY TRUST, INC. at this time. The combination of limited competitive advantages, high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.