Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link
NEW YORK (
) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
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Highlights from the ratings report include:
- CATO's revenue growth has slightly outpaced the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 0.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- CATO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, CATO has a quick ratio of 1.83, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has significantly increased by 139.77% to $1.25 million when compared to the same quarter last year. In addition, CATO CORP has also vastly surpassed the industry average cash flow growth rate of -19.02%.
- 35.94% is the gross profit margin for CATO CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 2.42% trails the industry average.
The Cato Corporation operates as a specialty retailer of fashion apparel and accessories in the Southeastern United States. The company operates in two segments, Retail and Credit. Cato has a market cap of $802.9 million and is part of the services sector and retail industry. Shares are down 8.2% year to date as of the close of trading on Monday.
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