CLCO

We rate Cool Co Ltd. (CLCO) as a Hold with a composite score of 55.1/100 at a current price of $9.65. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in value (77th percentile) and quality (68th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (37th percentile) and momentum (44th percentile) tempers our overall conviction. We assign a No Moat rating (39/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: balance sheet deleveraging progress. 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.

Cool Co Ltd. holds a top-quartile position (#0 of 50) within the Transportation, Communications, Electric, Gas, And Sanitary Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 55.1/100 places it at rank #1261 in our full 7,333-stock universe. At $427M in market capitalization, Cool Co Ltd. is a small-cap player in the Transportation, Communications, Electric, Gas, And Sanitary Services space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -11% combined with momentum at the 44th 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 100% (+44.9pp vs sector) narrow to operating margins of 48% (+30.6pp vs sector) and net margins of 29.8%, yielding a gross-to-net conversion rate of 30%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $9.65, Cool Co Ltd. appears undervalued relative to its fundamentals. Our value factor score of 77/100 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 stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

Valuation multiples are not available for this company, which limits our ability to assess relative pricing. We rely more heavily on factor-based valuation signals in such cases.

We assign a Medium uncertainty rating to Cool Co Ltd.. The stock presents a balanced risk profile: significant leverage (171% debt-to-equity). While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (171% debt-to-equity). 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 49th percentile and quality factor at the 68th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 100% provide a buffer against cost pressures; a 17.36% 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 is favorable for long-term investors.

We rate Cool Co Ltd.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 12.9%, and the balance sheet is managed within acceptable parameters (D/E: 171%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; Cool Co Ltd. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 17.36% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, Cool Co Ltd. receives a Hold rating with a composite score of 55.1/100 (rank #1261 of 7,333). Our quantitative framework assigns a No Moat (39/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 55/100.

Our analysis supports a neutral stance on Cool Co Ltd.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.