Cato Debt

CATO Stock  USD 3.92  0.12  3.16%   
Cato holds a debt-to-equity ratio of 0.636. At this time, Cato's Net Debt is very stable compared to the past year. As of the 25th of December 2024, Interest Debt Per Share is likely to grow to 0, while Short and Long Term Debt Total is likely to drop about 91 M. With a high degree of financial leverage come high-interest payments, which usually reduce Cato's Earnings Per Share (EPS).

Asset vs Debt

Equity vs Debt

Cato's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Cato's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the Company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Cato Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Cato's stakeholders.
For most companies, including Cato, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Cato Corporation, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Cato's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Price Book
0.4407
Book Value
10.102
Operating Margin
(0.01)
Profit Margin
(0.03)
Return On Assets
(0.03)
At this time, Cato's Non Current Liabilities Total is very stable compared to the past year. As of the 25th of December 2024, Non Current Liabilities Other is likely to grow to about 23.1 M, while Total Current Liabilities is likely to drop about 127.5 M.
  
Check out the analysis of Cato Fundamentals Over Time.

Cato Bond Ratings

Cato Corporation financial ratings play a critical role in determining how much Cato have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for Cato's borrowing costs.
Piotroski F Score
7
StrongView
Beneish M Score
(0.99)
Possible ManipulatorView

Cato Debt to Cash Allocation

As Cato Corporation follows its natural business cycle, the capital allocation decisions will not magically go away. Cato's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors.
Cato Corporation currently holds 153.12 M in liabilities with Debt to Equity (D/E) ratio of 0.64, which is about average as compared to similar companies. Cato has a current ratio of 1.5, which is within standard range for the sector. Note, when we think about Cato's use of debt, we should always consider it together with its cash and equity.

Cato Total Assets Over Time

Cato Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Cato uses debt to finance its assets. It includes both long-term and short-term borrowings maturing within one year. It also includes both tangible and intangible assets, such as goodwill.

Cato Debt Ratio

    
  8.55   
It appears that most of the Cato's assets are financed through equity. Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the Cato's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Cato, which in turn will lower the firm's financial flexibility.

Cato Corporate Bonds Issued

Cato Short Long Term Debt Total

Short Long Term Debt Total

91.01 Million

At this time, Cato's Short and Long Term Debt Total is very stable compared to the past year.

Understaning Cato Use of Financial Leverage

Leverage ratios show Cato's total debt position, including all outstanding obligations. In simple terms, high financial leverage means that the cost of production, along with the day-to-day running of the business, is high. Conversely, lower financial leverage implies lower fixed cost investment in the business, which is generally considered a good sign by investors. The degree of Cato's financial leverage can be measured in several ways, including ratios such as the debt-to-equity ratio (total debt / total equity), or the debt ratio (total debt / total assets).
Last ReportedProjected for Next Year
Short and Long Term Debt Total153.1 M91 M
Net Debt129.2 M135.6 M
Short Term Debt61.1 M38 M
Net Debt To EBITDA(33.17)(0.85)
Debt To Equity 0.16  0.15 
Debt To Assets 0.09  0.09 
Long Term Debt To Capitalization 0.10  0.11 
Total Debt To Capitalization 0.12  0.14 
Debt Equity Ratio 0.16  0.15 
Debt Ratio 0.09  0.09 
Cash Flow To Debt Ratio 2.15  2.26 
Please read more on our technical analysis page.

Pair Trading with Cato

One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if Cato position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Cato will appreciate offsetting losses from the drop in the long position's value.

Moving against Cato Stock

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The ability to find closely correlated positions to Cato could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Cato when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back Cato - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling Cato Corporation to buy it.
The correlation of Cato is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as Cato moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Cato moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for Cato can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.
Pair CorrelationCorrelation Matching
When determining whether Cato offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Cato's financial statements, including income statements, balance sheets, and cash flow statements, to assess its financial health. Key financial ratios are used to gauge profitability, efficiency, and growth potential of Cato Corporation Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Cato Corporation Stock:
Check out the analysis of Cato Fundamentals Over Time.
You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Is Specialty Retail space expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Cato. If investors know Cato will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Cato listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth
(0.90)
Dividend Share
0.68
Earnings Share
(0.89)
Revenue Per Share
35.031
Quarterly Revenue Growth
(0.08)
The market value of Cato is measured differently than its book value, which is the value of Cato that is recorded on the company's balance sheet. Investors also form their own opinion of Cato's value that differs from its market value or its book value, called intrinsic value, which is Cato's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Cato's market value can be influenced by many factors that don't directly affect Cato's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Cato's value and its price as these two are different measures arrived at by different means. Investors typically determine if Cato is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Cato's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.

What is Financial Leverage?

Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.

Leverage and Capital Costs

The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.

Benefits of Financial Leverage

Leverage provides the following benefits for companies:
  • Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
  • It provides a variety of financing sources by which the firm can achieve its target earnings.
  • Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.
By borrowing funds, the firm incurs a debt that must be paid. But, this debt is paid in small installments over a relatively long period of time. This frees funds for more immediate use in the stock market. For example, suppose a company can afford a new factory but will be left with negligible free cash. In that case, it may be better to finance the factory and spend the cash on hand on inputs, labor, or even hold a significant portion as a reserve against unforeseen circumstances.

The Risk of Financial Leverage

The most obvious and apparent risk of leverage is that if price changes unexpectedly, the leveraged position can lead to severe losses. For example, imagine a hedge fund seeded by $50 worth of investor money. The hedge fund borrows another $50 and buys an asset worth $100, leading to a leverage ratio of 2:1. For the investor, this is neither good nor bad -- until the asset price changes. If the asset price goes up 10 percent, the investor earns $10 on $50 of capital, a net gain of 20 percent, and is very pleased with the increased gains from the leverage. However, if the asset price crashes unexpectedly, say by 30 percent, the investor loses $30 on $50 of capital, suffering a 60 percent loss. In other words, the effect of leverage is to increase the volatility of returns and increase the effects of a price change on the asset to the bottom line while increasing the chance for profit as well.