STHO

We rate Star Holdings (STHO) as a Reduce with a composite score of 44.5/100 at a current price of $8.68. 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 momentum (44th percentile) and quality (43th percentile), which together account for the majority of the composite score. Offsetting weakness in stability (31th percentile) and investment (35th percentile) tempers our overall conviction. We assign a No Moat rating (19/100), 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.

Star Holdings 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 44.5/100 places it at rank #2885 in our full 7,333-stock universe. At $109M in market capitalization, Star Holdings 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 contraction of -8% 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 37% (-39.5pp vs sector) narrow to operating margins of -22% (-39.5pp vs sector) and net margins of 56.0%, yielding a gross-to-net conversion rate of 151%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $8.68, Star Holdings is trading at a premium to fundamental value. Our value factor score of 36/100 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 2.4x (a 80% discount to the sector median of 11.9x), EV/EBITDA of 8.6x (near the sector median), P/B of 0.4x, P/S of 1.0x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to Star Holdings. The stock presents a balanced risk profile: significant leverage (101% debt-to-equity) and below-average price stability (31th 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 (101% debt-to-equity); below-average price stability (31th percentile). 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 31th percentile and quality factor at the 43th percentile provide a quantitative summary of the overall risk landscape.

We identify limited risk mitigants at this time, which contributes to our medium uncertainty assessment. Investors should monitor for improvement in balance sheet metrics, margin stability, and business predictability that could warrant a downgrade in our risk assessment over time.

We rate Star Holdings's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 16.5%, and the balance sheet is managed within acceptable parameters (D/E: 101%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; Star Holdings falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, 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, Star Holdings receives a Reduce rating with a composite score of 44.5/100 (rank #2885 of 7,333). Our quantitative framework assigns a No Moat (19/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 38/100.

Our analysis does not support a constructive view on Star Holdings 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.