CTO

We rate CTO Realty Growth, Inc. (CTO) as a Reduce with a composite score of 45.7/100 at a current price of $19.43. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in stability (70th percentile) and momentum (50th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (25th percentile) and value (39th percentile) tempers our overall conviction. We assign a No Moat rating (28/100), High uncertainty, and Poor capital allocation.

Key items to watch: balance sheet deleveraging progress; sustainability of the current growth rate; the path to profitability. 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.

CTO Realty Growth, 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 45.7/100 places it at rank #2686 in our full 7,333-stock universe. At $537M in market capitalization, CTO Realty Growth, Inc. is a small-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 31%, though momentum at the 50th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 74% (-2.0pp vs sector) narrow to operating margins of 8% (-9.4pp vs sector) and net margins of -7.2%, yielding a gross-to-net conversion rate of -10%. 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 $19.43, CTO Realty Growth, Inc. is trading at a premium to fundamental value. Our value factor score of 39/100 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 247.0x (a 1970% premium to the sector median of 11.9x), EV/EBITDA of 123.8x (at a premium), P/B of 1.1x, P/S of 4.5x. 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 CTO Realty Growth, Inc.. Key risk factors include significant leverage (109% debt-to-equity), current negative profitability (net margin -7.2%), weak quality scores (25th percentile). 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 (109% debt-to-equity); current negative profitability (net margin -7.2%); weak quality scores (25th percentile); low beta of 0.42 — 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 70th percentile and quality factor at the 25th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 74% provide a buffer against cost pressures; above-average stability (70th percentile) suggests predictable business dynamics; a 9.33% 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 CTO Realty Growth, Inc.'s capital allocation as Poor. Key concerns include low returns on equity (-2.1%), negative profitability, weak asset returns (ROA -0.9%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — CTO Realty Growth, 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, CTO Realty Growth, Inc. receives a Reduce rating with a composite score of 45.7/100 (rank #2686 of 7,333). Our quantitative framework assigns a No Moat (28/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 45/100.

Our analysis does not support a constructive view on CTO Realty Growth, 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.