SAFE

We rate Safehold Inc. (SAFE) as a Reduce with a composite score of 43.0/100 at a current price of $15.88. 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 value (44th percentile) and quality (43th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (36th percentile) and investment (37th percentile) tempers our overall conviction. We assign a No Moat rating (24/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; 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.

Safehold 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 43.0/100 places it at rank #3117 in our full 7,333-stock universe. At $1.3B in market capitalization, Safehold 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 7%, though momentum at the 36th 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 99% (+22.3pp vs sector) narrow to operating margins of 24% (+6.7pp vs sector) and net margins of 28.1%, yielding a gross-to-net conversion rate of 28%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $15.88, Safehold Inc. is trading near fair value based on current fundamentals. Our value factor score of 44/100 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. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 10.7x (roughly in line with the sector median of 11.9x), EV/EBITDA of 57.9x (at a premium), P/B of 0.5x, P/S of 3.0x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to Safehold Inc.. The stock presents a balanced risk profile: significant leverage (188% debt-to-equity) and below-average price stability (39th percentile). 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 (188% debt-to-equity); below-average price stability (39th 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 39th percentile and quality factor at the 43th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 99% provide a buffer against cost pressures; a 4.57% 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 Safehold Inc.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 4.4%, and the balance sheet is managed within acceptable parameters (D/E: 188%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; Safehold Inc. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 4.57% 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, Safehold Inc. receives a Reduce rating with a composite score of 43.0/100 (rank #3117 of 7,333). Our quantitative framework assigns a No Moat (24/100, trend: stable), Medium uncertainty, and Standard 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 Safehold Inc. at this time. The combination of limited competitive advantages, medium uncertainty, and standard capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.