Hook / Thesis
Granite Point Mortgage Trust (GPMT) is one of those situations where headline price action has outpaced the fundamentals. At the last reported quarter (Q3 fiscal 2025, filing dated 11/05/2025) the company returned to a small GAAP profit and continued to generate positive operating cash flow. Yet the stock is trading very far below reported book equity.
Using the company's own balance sheet and weighted share data from Q3 2025, implied market capitalization is roughly $100M while equity attributable to the parent stands at $581,986,000. That implies a price-to-book in the neighborhood of 0.17x. My thesis: that discount has largely burned off the worst-case outcomes, and a patient, disciplined long trade sized appropriately for risk can capture a rerating as quarterly results and dividend stability normalize. This is a tactical trade (6-12 months) — not a buy-and-forget income play — with a clear entry, stop and targets below.
What Granite Point Does and why investors should care
Granite Point is a specialty CRE finance REIT that directly originates and manages senior floating-rate commercial mortgage loans and other debt-like commercial real estate investments. The business is loan-by-loan, with emphasis on intermediate-term bridge and transitional financings - think acquisitions, recapitalizations, refinancings and value-add projects (lease-up, renovation, repositioning).
Why this matters: as a floating-rate commercial mortgage lender, Granite Point's core economics are interest-and-dividend income less funding costs and operating expenses. When the firm can hold net interest margin and avoid major nonoperating markdowns, the balance sheet supports a robust book value per share and the company can pay a meaningful dividend. That structural profile — relatively predictable interest income plus mark-to-market noise — is why book value matters more here than headline EPS.
The data that supports the call
- Book / equity: As of 09/30/2025 Granite Point reported equity attributable to parent of $581,986,000 on total assets of $1,805,845,000 (balance sheet in the Q3 2025 filing dated 11/05/2025).
- Share count proxy and implied market cap: Q3 2025 shows a diluted (and basic) average share count of 47,394,519. Using the last trade price ~$2.13 (most recent snapshot), implied market cap is roughly $101M (2.13 x 47.394M ≈ $101M). That produces an implied price-to-book of about 0.17x—an 83% discount to reported book equity.
- Operating performance: The Q3 2025 income statement shows revenues (interest & dividend) of $33.72M and operating income of $21.258M. Importantly, the company reported net income of $3.035M for the quarter — a swing to positive after earlier quarters of GAAP losses (Q2 2025 net loss -$13.363M; Q1 2025 net loss -$7.015M).
- Interest dynamics: In Q3 2025 interest & dividend income was $33.72M vs interest expense $23.424M, a gross spread supporting operating income and showing funding costs are not crippling the core margin for this quarter.
- Cashflow behavior: Net cash flow from operating activities for Q3 2025 was positive at $4.519M, while investing flows reflect active origination activity (net cash flow from investing activities +$90.323M implying portfolio deployment and repositioning).
- Dividend policy: Management has continued to pay dividends albeit at a reduced run-rate. The most recent declared quarterly dividend (12/17/2025) is $0.05, with a pay date of 01/15/2026. That annualizes to $0.20 — implying a cash yield of ~9.4% at today's price (~$2.13).
Put simply: the company is still generating operating income and operating cash flow; the headline GAAP losses that compressed book have started to ebb in the latest quarter and nonoperating losses shrank meaningfully in Q3 2025 (nonoperating income/loss of +$5.263M in Q3 vs deep negatives earlier). The balance sheet still carries substantial equity relative to the current market cap, which is where the rerate argument starts.
Valuation framing
I want to be conservative: I assume the Q3 2025 diluted average share count (47.394M) is a reasonable proxy for outstanding shares. That gives an approximate market cap of $100-110M at current prices. Comparing that to tangible book equity of ~$582M gives an extremely low market valuation vs balance sheet equity—an ~0.17x P/B ratio.
Historically Granite Point traded materially higher P/B multiples in years prior to the rate-driven markdowns (book equity in earlier reported quarters was larger: e.g., equity attributable to parent was $667.8M as of 03/31/2025 and $704.6M as of 06/30/2024). The big picture: the market has priced in either: (a) further severe asset-value deterioration, or (b) a high probability of dilution / recapitalization destroying common equity. The latest quarter reduces (but does not eliminate) both risks.
Because listed direct peers in this dataset are not relevant comparables, frame valuation pragmatically: a rerating to 0.3-0.5x book would still be conservative vs long-run recoveries for REITs once mark volatility abates. Even a move from 0.17x to 0.30x book implies share prices roughly double from here on a static book assumption.
Catalysts
- Quarterly results continuity - follow-up GAAP profitability or materially reduced nonoperating markdowns in upcoming filings (next two quarterly releases) would validate the Q3 improvement.
- Stabilization or modest increase in dividend (management returning toward prior quarterly levels) would draw income-focused buyers back into the name.
- Investor recognition of the balance-sheet disconnect - as analysts reprise book-based valuations the stock could rerate even without immediate asset sales.
- Any announced asset sales, repurchases or targeted capital raises that preserve common equity would limit downside and support rerating.
Trade idea - actionable
This is a trade for investors who can stomach idiosyncratic REIT risk and potential mark volatility. Size the position modestly.
Trade Direction : Long GPMT
Entry range : $1.95 - $2.40 (ideal add-window below $2.30)
Initial stoploss : $1.65 (protects against >20% immediate downside from current levels)
Target 1 (near) : $3.50 (first rerate; ~0.28x P/B on static book)
Target 2 (ambitious): $5.50 (further rerating toward ~0.45x P/B; multi-quarter path)
Time horizon : 6 - 12 months
Risk level : Medium-High
Sizing : Small allocation (single-digit percent of portfolio for typical risk tolerance)Rationale: the entry window gives a margin below the recent $2.13 print; the stop is set where continued downside would imply a materially worse operating / liquidity outcome or indicate further balance-sheet impairment beyond Q3 observations. The targets represent conservative re-ratings to modest fractions of book value rather than full book realization.
Risks and counterarguments
Any long here must acknowledge significant risks. I list the principal ones below and then give a counterargument that tempers but does not eliminate them.
- Further mark-to-market losses - CRE valuations could continue to deteriorate, producing larger nonoperating losses and destroying book equity. The company reported material nonoperating losses in prior quarters (e.g., Q1 and Q2 2025) and those could re-appear.
- Funding/liquidity stress - large negative cash flows from financing activities have been recorded historically, and tightening wholesale funding markets could force asset sales or dilutive equity raises at distressed prices.
- Dividend cut / shareholder flight - management has already reduced distributions; further cuts would remove the income investor base and could accelerate price decay.
- Opaque credit deterioration - loan-level defaults or higher-than-expected provisions that are not yet visible in the quarterly income statement could cause a sudden and permanent impairment to book value.
- Low float / liquidity risk - small market caps and low trading floats can exacerbate downside moves and widen bid-ask dynamics.
Counterargument - why the worst-case may already be priced: the market already assumes severe asset deterioration or dilution, given the ~0.17x P/B. Q3 2025 produced positive net income ($3.035M) and positive operating cash flow ($4.519M), while nonoperating results improved (nonoperating income +$5.263M). Management maintained a quarterly cash dividend (declared 12/17/2025 and payable 01/15/2026) even at a reduced level, suggesting they are prioritizing payout stability. Those facts imply the balance sheet and operating engine still function — and that path-dependence could allow a rerating absent a new shock.
What would change my mind
I would abandon the long thesis if any of these occur: (1) a material, multi-quarter acceleration of loan defaults or provisions that materially reduces book equity below current stated levels; (2) an equity raise or preferred recapitalization that meaningfully dilutes common shareholders; (3) a repeat of very large nonoperating markdowns in the next reported quarter(s) that suggest a structural asset-quality deterioration, not merely cyclical marking.
Conclusion
GPMT is an asymmetric-risk trade: the balance sheet today (Q3 2025) supports a much higher valuation than the market currently affords, while recent operating results show signs of stabilization. That does not mean the position is risk-free; funding, credit and mark volatility remain real threats. For disciplined investors who size appropriately, take the entry window below $2.30, use a hard stop around $1.65 and wait for the market to reprice a company that still generates operating cash flow and carries meaningful book equity. If the next couple of quarter filings repeat Q3's improvement, the rerate should accelerate.
Note: I use the company's reported 09/30/2025 quarter and associated share-counts as the arithmetic base for valuation and implied market cap. This trade is a tactical, research-driven idea rather than formal investment advice.
Key supporting dates cited
- Q3 fiscal 2025 filing acceptance: 11/05/2025 (quarter ended 09/30/2025)
- Most recent quarterly dividend declaration: 12/17/2025; pay date 01/15/2026