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$800.0 million
IndustryApparel retail
Trailing-12-Month Revenue$931.5 million
ManagementChairman/CEO John Derham Cato (since 1999)
CFO John Howe (since 2008)
Return on Capital (average, past 3 years)17.9%
Cash/Debt$240.7 million / $0
Dividend Yield3.3%
CompetitorsAscena Retail Group
Charming Shoppes
Deb Shoppes

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 83% of the 95 members who have rated Cato believe the stock will outperform the S&P 500 going forward.

Earlier this month, one of those Fools, ElCid16, tapped Cato as a sustainable income opportunity:

Even though the dividend yield is at 3.4%, their payout ratio based on earnings is only about 40%. The company has $240 million in cash and no debt. ...

2008 and 2009 were a little rough on the company and the company had to close quite a few stores. ... Since then, the company has stabilized a bit and seems to be back on track. The dividend will likely prevent a big drop in share price, but any news regarding growth could send this thing much higher, similar to what happened with Gap about 3 months ago.

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. Of course, despite a strong four-star rating, Cato may not be your top choice.

We've found another retailer we are incredibly excited about -- excited enough to dub it "The Motley Fool's Top Stock for 2012." We have compiled a special free report for investors to uncover this stock today. The report is 100% free, but it won't be here forever, so click here to access it now.

Want to see how well (or not so well) the stocks in this series are performing? Follow the newTrackPoisedToCAPS account.

At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Cato. 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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