Breaking Down SFL Corporation Ltd. (SFL) Financial Health: Key Insights for Investors

If you're looking at SFL Corporation Ltd. right now, you're seeing a classic maritime infrastructure play: strong long-term cash flow visibility but a little choppiness in the near-term financials. The headline numbers from the Q3 2025 report show total operating revenues of $178 million and a net income of $8.6 million, which is positive, but honestly, the nine-month revenue figure of $557.5 million compared to last year tells a more complex story about the drilling sector slowdown. The real anchor here is their fixed-rate charter backlog (guaranteed future revenue from long-term contracts), which still sits robustly at around $4.0 billion, providing a solid foundation for that $0.20 per share quarterly dividend. But, you defintely need to understand the drag from assets like the Hercules rig, which is currently un-employed, because that's where the near-term profitability pressure is coming from. We have to map that risk against the opportunity in their fleet optimization, so let's break down what these figures truly mean for your investment decision.

Revenue Analysis

You need to know where SFL Corporation Ltd. (SFL)'s money is actually coming from, and the core takeaway is that while the long-term contract structure provides stability, the near-term revenue trend shows a contraction. For the third quarter of 2025, SFL Corporation Ltd. reported total operating revenues of $178 million. This figure reflects a decline from the prior quarter, and the trailing twelve-month (TTM) revenue ending September 30, 2025, sat at $774.52 million, representing a year-over-year decrease of -11.59%.

The company's revenue streams are primarily charter hire, which is the income generated from leasing its vessels and rigs to industrial end-users under long-term contracts. This model gives SFL a substantial, predictable cash flow stream, but it also means revenue growth is tied to fleet expansion or contract renegotiations, not short-term spot market volatility. The fixed-rate charter backlog remains robust at approximately $4.0 billion, which provides strong earnings visibility for the next 6.5 years.

SFL is a shipping company, plain and simple.

The revenue breakdown for Q3 2025 clearly illustrates the company's dependency on its maritime assets over its energy segment. Shipping is the dominant force, a concentration that should inform your risk assessment. Here's the quick math on the Q3 2025 segment contributions:

The significant change in revenue streams over 2025 relates directly to the energy side of the business, specifically drilling contract revenues. The decline in Q1 2025 revenues to $186.7 million was largely attributed to this segment, and the legacy drilling rig Hercules continues to be the only asset not employed on profitable charters, acting as a drag on overall performance. This means the revenue decline isn't a systemic failure in the core shipping business, but a targeted issue in a non-core segment.

Still, the fleet optimization strategy-selling older vessels and upgrading modern ones with fuel-efficiency improvements-has temporarily reduced cash flow generation, which explains some of the TTM revenue contraction. If you are evaluating SFL Corporation Ltd. (SFL)'s financial health, you defintely need to keep this segment-specific weakness in mind, even as the core shipping revenue remains locked in by long-term contracts. For a deeper dive into the valuation, you should look at Breaking Down SFL Corporation Ltd. (SFL) Financial Health: Key Insights for Investors.

Profitability Metrics

You need to know if SFL Corporation Ltd. (SFL) is turning its solid charter hire revenue into real profit, especially with the market volatility we've seen. The quick answer is that while the company maintains a high gross margin, its net profitability has been highly inconsistent in 2025, swinging from a significant loss in Q1 to a modest gain in Q3, largely due to one-off costs and drilling segment weakness.

In the first nine months of 2025, SFL Corporation Ltd. reported total operating revenues of $557.5 million, a noticeable decline from the same period in 2024, which was $675.3 million. This drop is primarily tied to a significant reduction in drilling contract revenues. Still, the core shipping business shows operational strength, a key factor to watch.

Gross, Operating, and Net Profit Margins

When we look at the margins, the story is one of strong operational efficiency (Gross Margin) being diluted by other costs, especially in the first half of the year. Your focus should be on the spread between the Gross and Net Profit margins to see where the money is leaking.

Here's the quick math on the 2025 quarterly performance, based on reported charter hire and net income:

The 60.37% Gross Profit Margin in Q2 2025 is defintely impressive, showing SFL Corporation Ltd.'s ability to control vessel operating expenses (like crew, maintenance, and insurance). But, the Net Profit Margin tells a very different, volatile story. That -16.49% loss in Q1 was a direct result of one-off items, including impairments on older dry-bulk vessels and the drilling rig Hercules being idle.

Profitability Trends and Operational Efficiency

The trend over 2025 shows a clear, albeit slow, recovery from the Q1 loss, but it's still significantly weaker than the prior year. In 2024, SFL Corporation Ltd. reported a full-year Operating Income of $306.717 million on $894.06 million in revenue, giving an Operating Profit Margin of roughly 34.30%. The full-year 2024 Net Profit Margin was also healthier at approximately 14.61%.

What this estimate hides is the impact of the fleet renewal strategy. Management is actively divesting older, less efficient vessels and investing in upgrades, which improves the fleet's operational and fuel consumption efficiency. This is a long-term positive for the gross margin, but the near-term costs of divestment and idle assets (like the Hercules rig) are hitting the bottom line hard now.

• Manage costs: SFL Corporation Ltd. invested nearly $100 million in fuel efficiency and cargo optimization upgrades.
• Efficiency payoff: These upgrades contributed to adding approximately $1.2 billion to the fixed rate charter backlog.
• Near-term headwind: The legacy drilling rig Hercules remains a challenge, impacting near-term financial results as it is 'warm stacked' (maintained but idle).

Industry Comparison

Compared to the wider shipping industry, SFL Corporation Ltd.'s profitability is mixed. The average operating margin for major ocean carriers in Q1 2025 fell to 18.1%. SFL Corporation Ltd.'s implied operating margin, while not fully calculated here, is likely below this average for the first half of 2025 due to the drilling segment's drag and one-off costs.

For context, the combined Earnings Before Interest and Tax (EBIT) for major container shipping lines dropped to $2.73 billion in Q2 2025, reflecting a market where profitability is softening due to market disruptions and downward pressure on freight rates. SFL Corporation Ltd.'s strategy of securing long-term time charters with strong counterparties helps it buffer against this volatility, giving it a more stable, infrastructure-like earnings profile than pure spot-market players. You can dive deeper into the strategic intent behind these decisions by reading the Mission Statement, Vision, & Core Values of SFL Corporation Ltd. (SFL).

Next step: Check SFL Corporation Ltd.'s debt covenants against the Q1 2025 net loss to ensure no technical defaults were triggered.

Debt vs. Equity Structure

You're looking at SFL Corporation Ltd. (SFL) and wondering how they pay for that massive fleet-it's a valid question, because the balance between debt and equity (shareholder funding) tells you everything about a company's risk appetite and financial flexibility. The short answer is: SFL leans heavily on debt, which is typical for the capital-intensive shipping and leasing sector, but it's a strategy that demands close monitoring of interest rates and cash flow.

As of the most recent data from the end of the third quarter of 2025, SFL Corporation Ltd. (SFL)'s total debt load is substantial. The company reported approximately $813.119 million in short-term debt and the current portion of long-term interest-bearing debt, plus another $1,947.419 million in long-term interest-bearing debt. Here's the quick math: that puts their total debt at around $2.76 billion, which is a slight decrease from the $2.81 billion reported just a few months earlier in June 2025.

The key metric here is the debt-to-equity ratio, which shows how much debt the company uses to finance its assets compared to the value of shareholders' equity. For SFL Corporation Ltd. (SFL), this ratio stands at approximately 2.80 for the current fiscal year. To be fair, a high ratio is common in this industry; you can't buy a fleet of vessels without taking on significant leverage (borrowed capital). Still, SFL's ratio is on the higher side compared to some peers, like Frontline at 1.5 or Nordic American Tankers at 0.9. This suggests a more defintely aggressive financing strategy, which can amplify returns in good times but also magnify losses when the market turns.

SFL Corporation Ltd. (SFL) has been active in the capital markets to manage its debt maturity profile. They balance debt financing-which provides a cheaper source of capital than equity if the return on assets exceeds the interest rate-with equity funding, which dilutes ownership but reduces financial risk. Their recent activities show a clear trend toward refinancing and diversification:

• January 2025 Issuance: Placed USD 150 million in senior unsecured sustainability-linked bonds, maturing in 2030, with a fixed coupon of 7.75% per annum.
• September 2024 Refinancing: Successfully placed NOK 750 million in new bonds to call and refinance existing NOK 600 million bonds that were due in January 2025.
• April 2024 Issuance: Issued another USD 150 million in sustainability-linked bonds, this time with an 8.25% coupon, due in 2028.

The issuance of sustainability-linked bonds is a smart move, tying their cost of debt to environmental performance, which appeals to a broader base of investors. But, the 7.75% and 8.25% coupons on the new unsecured bonds are a clear indicator of the current higher interest rate environment and the market's perception of risk. This high cost of debt is a critical factor that eats into net income. If you want to dive deeper into who is buying these bonds and the company's overall shareholder base, you should read Exploring SFL Corporation Ltd. (SFL) Investor Profile: Who's Buying and Why?

What this estimate hides is the staggered maturity schedule of their debt, which is a key de-risking strategy. They are not facing a single, massive debt wall, but a series of smaller payments over the next few years, giving them time to secure new financing. Still, with a weighted average interest rate on their floating rate debt at 5.83% as of June 30, 2025, compared to 5.96% at the end of 2024, the high cost of capital is a persistent headwind.

Liquidity and Solvency

You need to know if SFL Corporation Ltd. (SFL) has enough short-term cash to cover its immediate bills, and the simple answer is that its liquidity ratios look tight, but the company's long-term contract structure provides a critical safety net. The key takeaway is to look past the low current ratio and focus on the predictable, long-term cash flow from their charter backlog.

Current and Quick Ratios: A Closer Look

In the shipping and maritime infrastructure sector, traditional liquidity metrics like the current ratio (current assets divided by current liabilities) often appear low, and SFL is no exception. As of the most recent trailing twelve months (TTM) data, the Current Ratio sits at about 0.30, with the Quick Ratio (which excludes inventory) also at approximately 0.30. A ratio under 1.0 is conventionally a red flag, suggesting current liabilities exceed current assets. However, for a company like SFL, which relies heavily on long-term time charters (essentially long-term leases), this is common. The fixed-rate charter backlog of approximately $4 billion as of Q3 2025 is the real current asset, even though much of it isn't classified as such on the balance sheet.

Working Capital and Cash Position

The low ratios translate directly into a negative working capital (current assets minus current liabilities). Recent data places SFL's working capital at a deficit of around ($511.84 million). This negative trend is a structural feature of their business model, where they finance large, long-life assets (vessels) with debt that often has short-term current portions. Still, the actual cash position is strong: SFL ended the third quarter of 2025 with approximately $278 million in cash and cash equivalents, plus an additional $40 million to $44 million in undrawn credit lines, bringing total liquidity to roughly $320 million. That's a decent war chest.

Cash Flow Statements Overview

The cash flow statement gives a clearer picture of operational health than the balance sheet alone. Here's the quick math on SFL's cash flow trends:

• Operating Cash Flow (OCF): The company generated $66.841 million in OCF during Q3 2025. This is the lifeblood, showing steady cash generation from their charter agreements.
• Investing Cash Flow (ICF): This flow is heavily negative, reflecting significant capital expenditures (CapEx). SFL is in a fleet renewal and expansion phase, with remaining CapEx of approximately $850 million for five new container vessels. TTM CapEx as of mid-2025 was about -$480.77 million.
• Financing Cash Flow (FCF): This is where they manage the debt and equity. The company's strategy involves financing the newbuild CapEx, which will keep FCF volatile. They also declared their 87th consecutive quarterly dividend of $0.20 per share in Q3 2025, which is a consistent cash outflow to shareholders.

Near-Term Risks and Strengths

The primary liquidity strength is the predictable revenue stream. The $4 billion charter backlog, with two-thirds from investment-grade counterparties, provides excellent cash-flow visibility. The main near-term risk is the funding of the $850 million newbuild program, which management expects to finance, and the continued idleness of the Hercules drilling rig, which is a drag on operating cash flow. What this estimate hides is the potential for unexpected dry-docking costs or charterer defaults, but the high utilization rates (e.g., 100% for tankers and car carriers in Q3 2025) mitigate this.

For a deeper dive into SFL's long-term strategy, you should read the full post: Breaking Down SFL Corporation Ltd. (SFL) Financial Health: Key Insights for Investors

Valuation Analysis

You're looking at SFL Corporation Ltd. (SFL) and asking the core question: is the market pricing this correctly? Honestly, the valuation signals are mixed, which is common in the shipping and energy sectors, but the key takeaway is that the stock looks reasonably priced on an asset basis but expensive on an earnings basis. The consensus is split between 'Hold' and 'Strong Buy,' suggesting a defintely complex picture.

Here's the quick math on where SFL Corporation Ltd. sits as of November 2025, with the stock trading around $8.19 per share. We need to look beyond the simple price tag and check the multiples.

• The Price-to-Earnings (P/E) ratio is high at 31.13. This is a red flag, as it tells you the market is paying a lot for each dollar of trailing twelve months (TTM) earnings, suggesting the stock is overvalued relative to its recent profit.
• The Price-to-Book (P/B) ratio is much more reasonable at approximately 1.10. This means the stock price is trading only slightly above its Book Value Per Share of $7.47, which is a sign of being fairly valued or even undervalued on an asset-backed basis.
• The Enterprise Value-to-EBITDA (EV/EBITDA) ratio, which is a better measure for asset-heavy companies like SFL Corporation Ltd. (SFL), is 8.19. This is a neutral-to-attractive multiple for the sector, indicating the business's core operational cash flow (Earnings Before Interest, Taxes, Depreciation, and Amortization) is not excessively priced.

Stock Price Trajectory and Analyst Sentiment

Over the last 12 months, SFL Corporation Ltd. (SFL) has been on a rollercoaster. The stock price hit a 52-week high of $11.14 in January 2025 but then dipped to a 52-week low of $6.73 in October 2025, before recovering slightly. Overall, the price has decreased by about -21.17% in the past year, which shows significant volatility and investor uncertainty.

What this estimate hides is the high dividend yield, which is a major draw for income investors. SFL Corporation Ltd. (SFL) declared its 87th consecutive quarterly dividend of $0.20 per share for Q3 2025, making the annualized dividend $0.80. This translates to a strong dividend yield of approximately 9.9%. The Payout Ratio, however, is a massive -8,000.00% because of negative TTM earnings, which means the dividend is currently being financed by other means, like asset sales or debt, not net income. That's a critical sustainability check for any high-yield stock.

The analyst community is split on the stock's future, so you need to weigh the bullish and bearish arguments yourself. The average consensus rating is a 'Strong Buy' with an average price target of $12.00, suggesting an upside of over 47% from the current price. However, you also see a 'Hold' rating with a target of $8.00, and a 'Sell' rating from another firm. This tells you there's no clear, unified view on SFL's near-term direction.

To be fair, the company's $4.0 billion charter backlog provides a strong, long-term revenue floor, which is a huge stability factor for a shipping company. That backlog is what keeps the dividend flowing despite the negative earnings. You should definitely check out Exploring SFL Corporation Ltd. (SFL) Investor Profile: Who's Buying and Why? for a deeper dive into the ownership structure.

Next step: Check the Q4 2025 guidance to see if the P/E ratio is expected to normalize. Finance: Draft a sensitivity analysis of the dividend yield against a 10% drop in charter rates by next Tuesday.

Risk Factors

You need to look past the strong dividend yield and the massive charter backlog at SFL Corporation Ltd. (SFL); the near-term risk profile is elevated by high debt and a struggling offshore segment. The company's core challenge is balancing its capital-intensive fleet renewal strategy against immediate cash flow demands, which forced a dividend adjustment this year.

Financial and Strategic Headwinds

The most immediate concern is financial leverage (debt). While SFL's business model relies on long-term charters (time charter agreements) to provide predictable cash flow, the balance sheet pressure is real. The company's liquidity ratios are low, with both the current ratio and quick ratio sitting at a concerning 0.3 as of the third quarter of 2025. This indicates a potential strain on short-term obligations.

This financial strain became concrete in August 2025 when the board reduced the quarterly cash dividend from $0.27 to $0.20 per share. This was a necessary, strategic move to preserve cash, but it signals that capital expenditures (capex) are outstripping operating cash flow. To be fair, they face a massive remaining capex commitment of approximately $850 million for five new container vessels, which won't deliver revenue until 2028. That's a huge capital hurdle to clear.

• High leverage strains cash flow.
• Dividend cut preserves capital.
• Newbuild capex is a significant future liability.

Operational and Market Exposure

SFL's diversified fleet is its strength, but it also creates pockets of vulnerability. The biggest operational risk is the legacy offshore drilling rig, Hercules, which remained idle-or warm-stacked-throughout the first three quarters of 2025. This segment is exposed to prolonged inactivity due to market uncertainty and oil price volatility, and it's a drag on overall performance.

Plus, the fleet optimization strategy, while smart for the long-term, is hitting near-term earnings. For the nine months ended September 30, 2025, total operating revenues declined to $557.5 million from $675.3 million in the same period of 2024, largely due to a significant drop in drilling contract revenues and the sale of older vessels. The company also took a net loss of $31.9 million in Q1 2025, driven by $34 million in impairments on older dry bulk vessels, which were subsequently sold. It's defintely a necessary cleanup, but it hurts the numbers now.

Mitigation and Actionable Resilience

The good news is that SFL Corporation Ltd. isn't just sitting still. The core mitigation strategy is their fixed-rate charter backlog, which stands at a robust approximately $4.0 billion as of Q3 2025, with a weighted remaining charter term of 6.5 years. This backlog, with two-thirds contracted to investment-grade counterparties, provides strong cash flow visibility and is the bedrock of their financial stability.

They are also aggressively modernizing the fleet, a crucial move given new environmental regulations. They've invested nearly $100 million since 2023 in fuel efficiency and cargo optimization upgrades, and now have 11 vessels capable of operating on Liquefied Natural Gas (LNG) fuel, including the five newbuilds. This focus on efficiency and long-term contracts with strong partners is how they navigate the cyclical nature of shipping. For a deeper dive into the company's overall health, you can check out our full report on Breaking Down SFL Corporation Ltd. (SFL) Financial Health: Key Insights for Investors.

Growth Opportunities

You want to know where SFL Corporation Ltd. (SFL) goes from here, especially with the market volatility we've seen. The core takeaway is that while near-term earnings are tight, the company's strategic shift to high-spec, long-term charters locks in future cash flow, which is the real story here. It's a classic infrastructure play in a shipping wrapper.

For the full 2025 fiscal year, consensus analyst estimates put SFL's revenue in a tight range, from around $727.05 million to $759.96 million. Earnings per share (EPS) estimates are narrow, hovering near break-even, ranging from a slight loss of -$0.03 per share to a small profit of $0.04 per share. The market is pricing in stability, not a sudden growth surge, but that stability is a competitive advantage in this sector.

The Fleet Upgrade and Backlog Advantage

The primary growth driver isn't a massive acquisition but an intense focus on fleet quality and securing long-term contracts. SFL has a fixed-rate charter backlog of roughly $4 billion, and here's the key: more than two-thirds of that is contracted to investment-grade counterparties, giving you incredible visibility on future cash flow. That's a strong foundation.

The company is intentionally selling older, less-efficient assets-like some dry bulk vessels-and pouring the capital into modernizing the remaining fleet. They have invested nearly $100 million so far in fuel efficiency and cargo optimization upgrades, which is defintely a smart move. This focus on green technology directly addresses stricter regulatory demands from organizations like the IMO (International Maritime Organization), and it's already added about $1.2 billion to the fixed-rate charter backlog.

• Upgrade fleet for efficiency and compliance.
• Lock in cash flow with long-term charters.
• Divest older assets to fund new investment.

Strategic Partnerships and Market Diversification

SFL's strategy centers on being a reliable maritime infrastructure partner, not a speculative spot-market player. They build long-term relationships with blue-chip customers. For example, the new five-year charter extensions secured for three large container vessels with Maersk alone added approximately $225 million to the charter backlog, starting from 2026. This is how you build resilience.

The company's diversification across tankers, bulkers, container vessels, car carriers, and offshore drilling rigs also helps mitigate risk. Container vessels currently make up the largest portion of the backlog, representing about 67% to 71% of the portfolio, giving them a strong position in a critical global trade segment. What this estimate hides, however, is the ongoing challenge with the legacy drilling rig Hercules, which remains idle, pressuring the energy segment's near-term cash flow.

Future Revenue and Long-Term Catalysts

Near-term growth is limited, but the pipeline for organic growth is active. SFL has five new container vessels under construction, though these aren't expected to be delivered until 2028. That's a longer-term catalyst, but it shows a commitment to fleet renewal with modern, high-earning assets. The company's unique track record of paying 87 consecutive quarterly dividends as of Q3 2025 also demonstrates a consistent commitment to shareholder returns, supported by this stable charter model.

To understand the full picture of who is buying into this strategy, you should take a look at Exploring SFL Corporation Ltd. (SFL) Investor Profile: Who's Buying and Why?

Here's the quick math on the backlog: $4 billion in revenue visibility over a long period means the company can focus on disciplined capital allocation and accretive investments, rather than chasing volatile market rates. That's a very different risk profile than many peers.

The next action item is clear: You: Monitor Q4 2025 earnings for any update on the Hercules rig employment status and new fleet financing by the next quarter.