Fashion retailer Cato Corp (CATO) was out with second quarter results premarket this morning, and it looks like a good quarter. Revenue rose 24% year/year, and the company bottom-lined $14 million or 62 cents/share. There are, however, no consensus analyst estimates for comparison as no one currently covers the name.
The already strong balance sheet strengthened, cash and short-term investments increased from $183 million or $8.53 at the end of Q1, to $217 million or just over $10/share. CATO reinstated a quarterly dividend of 11 cents in June, which is down from pre-COVID levels of 33 cents. Cash levels may spur dividend increases, or more stock buybacks, which the company has been actively engaged in over the years. In fact, since year-end 2015 through the end of Q1, CATO has reduced shares outstanding by nearly 27%. Buyback data for Q2 was not yet available.
CATO shares, which are up 70% year-to-date, and 101% over the past year, currently yield 2.7%. With more than $10/per share in cash, and closing Wednesday at $16.28, CATO continues to look cheap, and it will be interesting to see how the market reacts today to this underfollowed, relatively unknown name.
Elsewhere, next Wednesday, August 25th , could be a big day for SPAC Mudrick Capital (MUDS) , as shareholders will vote on the merger with Topps. I think it's probably a foregone conclusion that the merger will pass. If you owned MUDS shares by June 30th, you've likely received the special meeting proxy which, by the way, is about an inch thick.
Topps reported strong second quarter earnings on Wednesday before the market opened. Real Money's Timothy Collins already covered the results very thoroughly, so I will not repeat that information. I will point out that the company raised guidance for the full year, lifting net sales projections from the previous range of $740-$760 million, to between $830 and $850 million. Ditto "adjusted" EBITDA, which the company lifted from $130-$140 million to $155-$165 million.
By my math, assuming current MUDS shareholders would own 28% of Topps, and that net debt post-merger will be about $144 million, that would put the enterprise value/EBITDA at about 10, based on the mid-range of 2021 guidance. I've been continuing to build a MUDS position, as shares have been gravitating back towards $10.