The Cato (CATO) AI Stock Analysis

• Market Cap: $66.12M
• Dividend Yield: 20.3%
• Average Volume (3M): 44.71K
• Price to Earnings (P/E): ―
• Beta (1Y): 0.29
• Revenue Growth: -7.24%
• EPS Growth: -69.73%
• Country: US
• Employees: 7,000
• Sector: Consumer Cyclical
• Sector Strength: 57
• Industry: Apparel - Retail
• EPS (TTM): 0.17
• Shares Outstanding: 17,973,354
• 10 Day Avg. Volume: 48,775
• 30 Day Avg. Volume: 44,714
• PEG Ratio: -69.62
• Price to Book (P/B): 0.89
• Price to Sales (P/S): 0.00
• P/FCF Ratio: -33.27
• Enterprise Value/Market Cap: 5.39
• Enterprise Value/Revenue: 0.13
• Enterprise Value/Gross Profit: 1.69
• Enterprise Value/Ebitda: -13.39
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0

• Rating: 47 Neutral
• Price Target: $2.50 ▼(-16.94%Downside)

The overall stock score reflects Cato's significant financial and operational challenges, particularly declining revenues and negative profitability. The technical analysis indicates some short-term positive trends, but the overall valuation is concerning due to negative earnings. The corporate events further highlight the company's struggles, contributing to a negative outlook.

The Cato Business Overview & Revenue Model

Company Description

The Cato Corporation, together with its subsidiaries, operates as a specialty retailer of fashion apparel and accessories primarily in the southeastern United States. It operates through two segments, Retail and Credit. The company's stores and e-commerce websites offer a range of apparel and accessories, including dressy, career, and casual sportswear; and dresses, coats, shoes, lingerie, costume jewelry, and handbags, as well as men's wear, and lines for kids and infants. It operates its stores and e-commerce websites under the Cato, Cato Fashions, Cato Plus, It's Fashion, It's Fashion Metro, and Versona names. As of January 29, 2022, the company operated 1,311 stores in 32 states. It also provides credit card services to its customers, as well as layaway plans for customers who agree to make periodic payments. The company was incorporated in 1946 and is headquartered in Charlotte, North Carolina.

How the Company Makes Money

The Cato Corporation generates revenue primarily through the sale of women's apparel, footwear, and accessories across its retail stores and e-commerce platform. The company leverages its diverse brand portfolio to cater to various market segments, enhancing its market reach and customer base. Cato's revenue streams are driven by in-store purchases, online sales, and seasonal promotions. Additionally, the company optimizes its supply chain and inventory management to maintain competitive pricing and attractive margins. The strategic location of its stores in community shopping centers and its focus on offering affordable fashion contribute significantly to its revenue generation. While Cato does not rely heavily on partnerships, its collaborations with suppliers for exclusive product lines and seasonal collections also play a role in attracting customers and boosting sales.

The Cato Financial Statement Overview

Summary

The Cato faces significant financial challenges with declining revenue, negative profitability, and cash flow issues. While the debt-to-equity ratio suggests some financial stability, liquidity and operational efficiency concerns are prominent.

Income Statement

The Cato's income statement highlights a decline in revenue over recent years, with a concerning net loss in the latest period. The gross profit margin for the most recent year is approximately 32.83%, a decrease from previous years. Additionally, the company has shown negative EBIT and EBITDA margins, indicating operational challenges. The net profit margin is also negative, reflecting overall profitability issues.

Balance Sheet

The balance sheet shows a moderate debt-to-equity ratio of 0.90, suggesting manageable leverage, but higher than before. The equity ratio stands at 35.88%, indicating reasonable financial stability. However, the company's total assets have decreased, and stockholders' equity has also declined, pointing to potential weaknesses in asset management and equity retention.

Cash Flow

Cash flow analysis reveals a negative free cash flow in the latest period, with a negative growth rate compared to the previous year, indicating liquidity challenges. The operating cash flow to net income ratio is unfavorable due to negative figures, while the free cash flow to net income ratio is also weak. These metrics highlight cash flow management issues and potential sustainability risks.

Breakdown
Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Income Statement		Total Revenue
649.81M	708.06M	759.26M	769.27M	575.11M
	Gross Profit
213.37M	243.74M	249.60M	316.21M	141.92M
	EBIT
-27.88M	-9.00M	1.84M	38.80M	-75.92M
	EBITDA
-6.24M	-3.90M	12.94M	49.25M	-57.94M
	Net Income Common Stockholders
-18.06M	-23.94M	29.00K	36.84M	-47.48M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
77.70M	102.95M	128.66M	165.76M	143.93M
	Total Assets
452.36M	486.82M	553.14M	633.77M	591.45M
	Total Debt
145.90M	153.12M	174.77M	184.33M	206.74M
	Net Debt
125.62M	129.18M	154.76M	164.57M	189.23M
	Total Liabilities
290.06M	294.50M	326.55M	379.57M	344.95M
	Stockholders Equity
162.30M	192.32M	226.59M	254.20M	246.50M
Cash Flow		Free Cash Flow
-27.62M	-12.05M	-6.06M	55.68M	-44.67M
	Operating Cash Flow
-19.75M	477.00K	13.37M	59.79M	-30.71M
	Investing Cash Flow
28.96M	19.78M	16.02M	-25.33M	64.51M
	Financing Cash Flow
-14.05M	-16.13M	-29.28M	-31.80M	-27.18M

The Cato Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 3.01
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CATO, the sentiment is Positive. The current price of 3.01 is above the 20-day moving average (MA) of 2.75, above the 50-day MA of 2.60, and below the 200-day MA of 3.80, indicating a neutral trend. The MACD of 0.12 indicates Negative momentum. The RSI at 57.21 is Neutral, neither overbought nor oversold. The STOCH value of 74.73 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for CATO.

The Cato Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
RGS	68 Neutral	$54.79M	0.60	548.07%	―	-4.88%	―
Sector *	62 Neutral	$6.90B	11.05	2.80%	4.27%	2.67%	-24.92%
CATO	47 Neutral	$66.12M	―	-14.43%	20.30%	-7.24%	-69.73%
TLYS	44 Neutral	$36.79M	―	-47.54%	―	-8.79%	-15.17%
VRA	44 Neutral	$52.24M	―	-36.91%	―	-24.95%	-2349.32%
DLTH	42 Neutral	$72.90M	―	-27.53%	―	-4.21%	-292.04%
PLCE	40 Underperform	$89.47M	―	-521.67%	―	-12.15%	75.86%

The Cato Corporate Events

The Cato Corporation Holds Annual Meeting and Reports Q1 Results

On May 22, 2025, The Cato Corporation held its Annual Meeting where shareholders elected two directors and approved amendments to the Employee Stock Purchase Plan and the selection of PricewaterhouseCoopers LLP as the independent auditor for the fiscal year ending January 31, 2026. In its first quarter report, Cato announced a net income of $3.3 million, a significant decrease from the previous year’s $11.0 million, and a 4% drop in sales attributed to cautious consumer spending and economic uncertainty. The company closed eight stores during the quarter, ending with 1,109 stores in operation.

The Cato Secures New Credit Facility with Wells Fargo

On March 13, 2025, The Cato Corporation entered into a new asset-based revolving credit facility agreement with Wells Fargo Bank, replacing a prior credit agreement from May 2022. This new facility allows for up to $35 million in credit, with potential expansion to $50 million, and will support the company’s working capital and general corporate needs. The agreement includes various financial covenants and restrictions, ensuring the company’s obligations are secured by its assets. The facility matures in 2028 and offers flexibility in borrowing and repayment terms, impacting the company’s financial operations and stakeholder interests.