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Cato Corporation is an American apparel retailer with a low EV and strong balance sheet, but poor operational results. The brand's value proposition seems outdated and not ideal for the current apparel retail landscape. Cato's operational efficiency is low, and there is a potential for large cash losses if revenues continue to decline.

Cato's share price has declined by ~77% from all-time highs reached in 2015. The company has not yet managed to break the negative sales trend.

The Cato Corporation has faced some pressure over the past several quarters, with profits and cash flows pushed lower. This may turn some investors off of the firm, but shares of the business are still affordably priced.

The Cato Corporation has faced some deterioration in its operations as of late, but this doesn't make the company a bad prospect. Shares are cheap on an absolute basis, meaning that some upside potential could be on the table.

This article is excerpted from Tom Yeung's Profit & Protection newsletter dated July 28, 2022. To make sure you don't miss any of Tom's picks, subscribe to his mailing list here.