4-Star Stocks Poised to Pop: Cato

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, women's apparel retailer Cato (NYS: CATO) has earned a respected four-star ranking.

With that in mind, let's take a closer look at Cato's business and see what CAPS investors are saying about the stock right now.

Cato facts

Headquarters (Founded)Charlotte, N.C. (1946)
Market Cap$712.1 million
IndustryApparel retail
Trailing-12-Month Revenue$939.3 million
Management

Chairman/CEO John Derham Cato (since 1999)

CFO John Howe (since 2008)

Return on Equity (Average, Past 3 Years)16.8%
Cash/Debt$267.9 million / $0
Dividend Yield3.8%

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 84% of the 91 members who have rated Cato believe the stock will outperform the S&P 500 going forward. These bulls include pbk100 and All-Star tenmiles, who is ranked in the top 0.05% of our community.

Earlier this year, pbk100 listed a few of Cato's positives: "No [long-term] debt, reasonable and growing dividend, growing revenue and earnings."

In fact, Cato currently sports a juicy dividend yield of 3.8%. That's higher than that of industry peers like Chico's FAS (NYS: CHS) (1.5%), Guess? (NYS: GES) (2.5%), and Limited Brands (NYS: LTD) (2.1%).

CAPS All-Star tenmiles elaborates on the income opportunity:

Re-entering long on debt-free CATO around $24 given its "sleep at night" balance sheet with large cash postion and healthy dividend. Unlikely to be worse than market performer for those with 3 year timeframe after recent sell-off. No LBO opportunity here as two tier share class structure, but good opportunity for the "value camp" types to scale in at more attractive price.

What do you think about Cato, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

Interested in another easy way to trackCato?Add it to your watchlist.

At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Guess? and Limited Brands, as well as writing covered calls in Guess?. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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