$0.00
$3.30
bear $0.00
base $0.70
bull $3.30
margin of safety $0.25
market price* $1.10
Business condition attached to the margin of safety
Two consecutive quarters of positive earnings after realized losses, with book value per common share holding at or above about $8.79 and no further widening of losses on the real-estate loan book.
Ready Capital is a commercial real estate lender. It makes and buys loans secured by real estate, including small-business (SBA) loans, funds them with a large amount of borrowing, and holds a book of loans that is currently shrinking. At the end of 2025, shareholders' equity was $1.6 billion, down about $0.3 billion in a year, and book value per common share was $8.79, compared with $10.61 at the end of 2023. What the numbers show. We measure owner earnings as operating cash flow, less swings in working capital, less stock compensation, less maintenance capital spending (the company reports no meaningful capital spending). For a lender, one further step matters: the sale or collection of loans held for sale runs through operating cash flow, so we treat the net change in those loans as a working-capital movement rather than as earnings. On that basis owner earnings per share were about -$0.87 (2019), -$1.54 (2020), -$0.98 (2021), $0.84 (2022), $0.73 (2023), $0.44 (2024) and -$0.32 (2025). Owner earnings growth in 2025 was negative, from $0.44 to -$0.32 a share, so we do not assume a rebound in year one. A limit of this method that the reader should know about: provisions for loan losses ($87 million in 2025, $293 million in 2024), write-downs of foreclosed property and realized losses on loan sales are non-cash charges that the method adds back, yet for a lender they are real losses of lent capital. The company's own net losses were $221 million in 2025 and $430 million in 2024, and its distributable return on equity was -16.8% and -15.0%. Owner earnings therefore look better than the underlying economics in 2023 and 2024, and we treat that as a reason to be cautious about the level rather than adjust the figures. Why the book is shrinking. New loans originated fell from $1,005 million in 2023 to $826 million in 2024 and $593 million in 2025, while loan repayments and sales brought in $2.1 billion in 2025. The company is returning to a smaller balance sheet, which lowers future earnings capacity. Loans are concentrated in Texas (25.8% of the balance), California (12.7%), Arizona (9.2%) and Florida (8.9%). Base case: $0.70 per share. We assume owner earnings of about $0.15 a share in year one, well below the 2022-2025 median of about $0.59, because the 2022 and 2023 results came from a larger, faster-growing book than the company has today and the latest year was negative. We then let earnings shrink about 15% a year, in line with the shrinkage in equity seen in 2025, and continue that decline beyond year ten. No growth is credited: new lending volume has fallen for two years and nothing in the filings secures a reversal. Bear case: $0 per share. Credit losses and realized losses continue at roughly the 2025 pace, owner earnings stay negative for about three years while the loan book keeps shrinking, and nothing durable remains to value. The model does not price shares below zero, since a shareholder's loss is limited to the amount invested, but the company's heavy borrowing leaves little cushion if losses persist. Bull case: $3.30 per share. The book stabilizes and owner earnings return to about $0.40 a share, the 2024 level, and hold there for twelve years before ending. That level was reached recently under the current lender's cost of funding; it is not a return to the 2022 and 2023 peak. What would make this wrong: a faster runoff of loans at or above their carrying values would return more capital than our earnings-based method credits, since repayments appear in investing cash flow rather than in owner earnings. Book value per share was flat at $8.79 between 2024 and 2025, well above our base value, so if the loan book proves to be worth close to its carrying value the shares are worth more than this analysis shows. We give that no credit because the last two years of losses, and the 2025 realized losses, show carrying values have repeatedly not been realized. Owner earnings for 2023 include discontinued operations. Six-month 2026 operating cash flow of $665 million is not used because it is likely dominated by loan sales and collections.