SFL

We rate SFL Corp Ltd. (SFL) as a Hold with a composite score of 57.5/100 at a current price of $10.85. 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 quality (70th percentile) and value (66th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (34th percentile) and momentum (43th percentile) tempers our overall conviction. We assign a Narrow Moat rating (41/100), High uncertainty, and Standard capital allocation.

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

SFL Corp 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 57.5/100 places it at rank #964 in our full 7,333-stock universe. At $1.4B in market capitalization, SFL Corp 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 is growing at 20%, though momentum at the 43th 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 100% (+44.9pp vs sector) narrow to operating margins of 34% (+16.4pp vs sector) and net margins of 14.4%, yielding a gross-to-net conversion rate of 14%. 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 $10.85, SFL Corp Ltd. is trading near fair value based on current fundamentals. Our value factor score of 66/100 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 10.6x (a 37% discount to the sector median of 16.9x), EV/EBITDA of 1.9x (discounted to peers), P/B of 1.3x, P/S of 0.4x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a High uncertainty rating to SFL Corp Ltd.. Key risk factors include significant leverage (252% debt-to-equity). 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 (252% 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 46th percentile and quality factor at the 70th 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 10.81% 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 SFL Corp Ltd.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 46.3%, and the balance sheet is managed within acceptable parameters (D/E: 252%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; SFL Corp Ltd. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 10.81% 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, SFL Corp Ltd. receives a Hold rating with a composite score of 57.5/100 (rank #964 of 7,333). Our quantitative framework assigns a Narrow Moat (41/100, trend: stable), High uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 52/100.

Our analysis supports a neutral stance on SFL Corp 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.