CTO

CTO Realty Growth ($CTO) Executives Buy Heavy, But Profitability Concerns Linger

09/16/2025 21:34

CTO Realty Growth Inc. ($CTO) is capturing investor attention as a retail-focused real estate investment trust (REIT) that owns and operates high-quality retail properties in high-growth U.S. markets, including Carolina Pavilion, Millenia Crossing, and Lake Brandon Village. With a market capitalization of approximately $539 million, this small-cap stock is currently trading in the mid-$16 range. A notable development has emerged at the company recently. In two distinct waves during June and September 2025, company executives engaged in concentrated insider buying. On June 26, President John Albright purchased 3,800 shares for approximately $64,808, while on the same day, SVP Philip Mays bought 1,000 shares ($17,290), SVP Daniel Smith acquired 1,000 shares ($17,002), and Director George Brokaw purchased 2,000 shares ($33,880). More significantly, a second wave of buying occurred in September. On September 11, President Albright made additional purchases of 4,200 shares ($69,443) and another 2,000 shares ($32,760), while SVPs Mays and Smith each bought an additional 1,000 shares. On September 12, SVPs Lisa Vorakoun and Steven Greathouse joined the buying activity. This coordinated insider buying suggests strong management confidence in the company's current valuation. However, the stock's price action tells a different story. $CTO peaked near $19.40 in mid-February 2025 but has experienced persistent weakness since then. The stock declined to the mid-$16 range in April and remains around $16.50-$16.60 levels, showing limited progress from its June 2024 price of $15.70. From a financial perspective, $CTO presents a mixed picture. Revenue growth remains solid, with trailing twelve months (TTM) revenue of $141 million representing a 13% year-over-year increase. Recent quarterly revenue growth has exceeded 30%, indicating strong top-line momentum. Operating cash flow of $76.95 million also demonstrates healthy cash generation. However, profitability concerns persist. The company reported a net loss of $37.66 million on a TTM basis, with earnings per share of -$1.30. The negative profit margin of 21.38% highlights urgent needs for profitability improvement. Most concerning is the debt-to-equity ratio exceeding 106%, creating a high-leverage structure that poses risks in a rising interest rate environment. Interestingly, $CTO maintains an attractive dividend yield of 9.17%, significantly above the typical REIT average of 4-6%. However, the payout ratio of 249% raises sustainability concerns, as current earnings cannot fully support dividend payments, likely requiring reliance on cash flow or capital transactions. Industry experts point to structural challenges facing retail REIT sector. The expansion of online shopping and changing consumer patterns have reduced demand for traditional retail spaces, while rising interest rates have diminished real estate investment attractiveness. High-leverage REITs particularly face pressure from increased interest expenses. Nevertheless, $CTO has differentiation factors. The company focuses on high-quality retail properties in high-population-growth areas and diversifies revenue through external management of Alpine Income Property Trust and commercial loan investments. Investors should monitor several key indicators. First, quarterly net income conversion is crucial, as current revenue growth trends could enable profitability improvement through cost control. Second, debt structure improvements and potential dividend policy changes warrant attention. Whether management's concentrated buying reflects genuine value conviction or merely price support will be tested by upcoming earnings releases. Analysts currently set price targets between $18.50-$23, suggesting 15-40% upside potential from current levels. Ultimately, $CTO represents a stock where positive insider buying signals coexist with financial vulnerabilities. Income-focused investors attracted to high dividend yields must carefully assess sustainability risks, while growth-oriented investors should closely track profitability recovery timing. Given small-cap REIT characteristics, volatility management remains essential.