C
hicago Atlantic Real Estate Finance (REFI) saw its net profit margin fall to 65.9% from 67.8% a year earlier, reflecting a decline in annual earnings. Over five years the company has posted an 11.8% earnings growth rate driven by high‑quality earnings, yet revenue is projected to rise only 5.8% annually—below the U.S. market average of 10.5%. The stock trades at $12.91, well under its estimated fair value and analyst targets, keeping a positive value narrative alive despite cautious forward profit outlooks and tightening margins.

    Analysts forecast a sharp margin contraction, from 67.2% today to 52.1% in three years. Current high net‑interest margins are supported by a weighted‑average loan yield of 16.8% and regulatory barriers in cannabis lending, but these advantages may erode as competition intensifies and rates shift. The company’s heavy reliance on smaller borrowers and sector concentration could amplify margin pressure if market conditions change or traditional lenders enter the space.

    Revenue growth is expected to slow to 2.2% annually over the next three years, while earnings are forecast to decline 2.8% per year, indicating a muted growth environment amid rising competition and sector headwinds. The loan‑origination pipeline is expanding from $462 million to $650 million, which should support future revenue, yet rising leverage (28% to 39% quarter‑over‑quarter), higher credit‑loss reserves (0.8% to 1.1%), and a loan moving into non‑accrual status signal increasing portfolio risk. While the cannabis‑lending focus offers a competitive edge, heavy sector concentration and dependence on non‑recurring fee income increase volatility as earnings growth stalls.