Cato Story

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CATO -- USA Stock  

USD 8.35  0.35  4.02%

Cato is scheduled to announce its earnings today. While some millenniums are indifferent towards consumer cyclical space, it makes sense to outline Cato Corporation as a unique investment alternative. We will evaluate why recent Cato price moves suggest a bounce in September. Here we also measure the ability of Cato to meet its long-term debt obligations, such as interest payments on debt, the final principal payment on the debt, and any other fixed obligations like lease payments.
Published over two weeks ago
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Thinking to exit Cato (NYSE:CATO) based on its current debt commitments?
The entity currently holds 210.39 M in liabilities with Debt to Equity (D/E) ratio of 0.79, which is about average as compared to similar companies. The asset utilization indicator refers to the revenue earned for every dollar of assets a company currently reports. Cato has an asset utilization ratio of 101.39 percent. This suggests that the company is making $1.01 for each dollar of assets. An increasing asset utilization means that Cato Corporation is more efficient with each dollar of assets it utilizes for everyday operations.
Cato financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Cato, including all of Cato's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Cato assets, the company is considered highly leveraged. Understanding the composition and structure of overall Cato debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it. Please read more on our technical analysis page.

Understanding Cato Total Debt

Cato liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Cato has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on Cato balance sheet include debt obligations and money owed to different Cato vendors, workers, and loan providers. Below is the chart of Cato main long-term debt accounts currently reported on its balance sheet.
You can use Cato Corporation financial leverage analysis tool to get a better grip on understanding its financial position

How important is Cato's Liquidity

Cato financial leverage refers to using borrowed capital as a funding source to finance Cato Corporation ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Cato financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Please check the breakdown between Cato's total debt and its cash.

Cato exotic insider transaction detected

Legal trades by Cato insiders are very common, as founders, directors, or employees of any publicly traded firm often have stock or stock options. These trades are made public in the United States through the filing of Form 4 of the Securities and Exchange Commission. Below entry was recorded recently and is publicly available as an insider trade:
Cato Corporation insider trading alert for general transaction of class a common stock by Thomas Henson, the corporate stakeholder, on 23rd of June 2020. This event was filed by Cato Corp with SEC on 2011-05-27. Initial filing of beneficial ownership - SEC Form 3 [view details]   
Note, although insider trading is legal, in the United States, Canada, Australia, and Germany, for mandatory reporting purposes, corporate insiders are defined as a company's officers, directors, and any beneficial owners of more than 10% of a class of the company's equity securities.

Breaking down Cato Indicators

Cato price slide over the last few months could raise concerns from institutional investors as the firm closed today at a share price of 7.42 on 313,573 in volume. The company management teams were not very successful in positioning the firm resources to exploit market volatility in July. However, diversifying your holdings with Cato Corporation or similar stocks can still protect your portfolio during high-volatility market scenarios. The stock standard deviation of daily returns for 30 days investing horizon is currently 4.34. This high volatility is attributed to the latest market swings and not so good earnings reports for some of the Cato partners.

Asset Breakdown

250.5 M
Assets Non Current
430.1 M
Current Assets
Total Assets680.66 Million
Current Assets430.13 Million
Assets Non Current250.53 Million
Tax Assets8.57 Million

Will Cato latest rise continue?

Latest risk adjusted performance indicator falls down to -0.14. Possible price upswing? Cato Corporation exhibits very low volatility with skewness of -1.88 and kurtosis of 7.8. However, we advise investors to further study Cato Corporation technical indicators to make sure all market info is available and is reliable.

Our Final Take On Cato

Whereas many other companies in the apparel retail industry are either recovering or due for a correction, Cato may not be as strong as the others in terms of longer-term growth potentials. All things considered, as of the 28th of August 2020, our actual 30 days 'Buy-vs-Sell' recommendation on the company is Strong Sell. However, we believe Cato is undervalued with below average chance of financial distress for the next two years.

About Contributor

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Achuva Shats do not own shares of Cato Corporation. Please refer to our Terms of Use for any information regarding our disclosure principles.

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