Stratus Rises 31% in Six Months: Should You Buy the Stock?

Core Viewpoint - Stratus Properties Inc. (STRS) has demonstrated significant stock performance, gaining 31.3% over the past six months, outperforming the industry average of 12% and competitors like CBRE Group and Brookfield Corporation [1] Group 1: Business Operations - Stratus is a real estate development company based in Austin, TX, focusing on entitlement, development, management, leasing, and sale of residential and retail properties, particularly in multi-family and mixed-use projects [2] - Revenue streams include property sales, leasing of retail and multi-family properties, and development and asset management fees through joint ventures [2][3] - The company operates independently and with third-party equity partners, maintaining a diverse portfolio of income-producing assets, properties under construction, and undeveloped land [3] Group 2: Key Tailwinds - Stratus has improved liquidity through strategic asset sales and joint ventures, notably receiving a $47.8 million distribution from the Holden Hills Phase 2 transaction [4] - The company has completed sales of Lantana Place – Retail and West Killeen Market, generating pre-tax net cash proceeds of $26.9 million and $7.8 million, respectively [4] - With $55 million in consolidated cash and access to revolving credit, Stratus is well-positioned for new developments, debt repayment, and shareholder-friendly actions [5] Group 3: Development Pipeline - Stratus controls approximately 1,500 acres of land and is advancing multiple projects, including Holden Hills Phases 1 and 2, The Saint Julia, and The Annie B [9] - Infrastructure construction for Holden Hills Phase 1 is nearing completion, and the partnership for Phase 2 provides capital for further planning [9] Group 4: Challenges - The company faces challenges such as elevated construction and labor costs, inflationary pressures, and a $2.8 million charge from terminating a lease for a planned project [10] - Stratus' real estate operations segment reported a loss of $9.6 million for the first nine months of 2025 due to weak sales activity [10] Group 5: Valuation - Stratus is currently trading at 10.9X trailing 12-month EV/sales value, which is higher than the industry average of 3.75X and its peers, CBRE Group (1.31X) and Brookfield (4.27X) [11] Group 6: Conclusion - The company's strong cash position, bolstered by high-value asset sales, supports reinvestment and capital return to shareholders, with growth potential in Texas markets [12] - However, persistent cost pressures and slower residential sales warrant caution for investors [12][13]