Cato Corporation (NYSE: CTR) retails women's fashions. It offers an assortment of apparel and accessories, including sportswear, dresses, coats, shoes, lingerie, costume jewelry and handbags. The company operates over 1,300 retail stores under the names Cato, Cato Fashions, Cato Plus, It's Fashion! and It's Fashion Metro, in 31 states. The stores are located primarily in strip shopping centers anchored by national discounters, or market-dominant grocery stores.
The firm surprised the Street last week, when it boosted its Q2 EPS guidance from 28-33 cents to 42-44 cents. Analysts had been expecting 30 cents. Management also announced that June same store sales were up 4.0% (yr/yr). That also topped the analyst view (+2.3%).
The stock popped into the initial stage of a bullish "pennant" consolidation pattern on the news. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the shares with two "holds". Analysts see a 16% average annual growth rate, through the next five years. The CTR P/E ratio (14.05), PEG ratio (0.86), Price to Sales ratio (0.49), Price to Book ratio (1.59) and Price to Cash Flow ratio (7.83) compare favorably with industry, sector and S&P 500 averages. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $12.48 and $25.18. A stop-loss of $14.90 looks good here. Note that the firm is expected to report Q2 results in mid-August.