John Derham Cato has been the CEO of The Cato Corporation (NYSE:CATO) since 1999, and this article will examine the executive’s compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
View our latest analysis for Cato
How Does Total Compensation For John Derham Cato Compare With Other Companies In The Industry?
According to our data, The Cato Corporation has a market capitalization of US$165m, and paid its CEO total annual compensation worth US$5.3m over the year to February 2020. We note that’s an increase of 23% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.3m.
For comparison, other companies in the same industry with market capitalizations ranging between US$100m and US$400m had a median total CEO compensation of US$2.4m. Hence, we can conclude that John Derham Cato is remunerated higher than the industry median. Moreover, John Derham Cato also holds US$19m worth of Cato stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
| Component | 2020 | 2019 | Proportion (2020) |
| Salary | US$1.3m | US$1.3m | 25% |
| Other | US$4.0m | US$3.0m | 75% |
| Total Compensation | US$5.3m | US$4.3m | 100% |
On an industry level, around 19% of total compensation represents salary and 81% is other remuneration. Cato is paying a higher share of its remuneration through a salary in comparison to the overall industry. If non-salary compensation dominates total pay, it’s an indicator that the executive’s salary is tied to company performance.
The Cato Corporation’s Growth
The Cato Corporation has seen its earnings per share (EPS) increase by 6.2% a year over the past three years. Its revenue is down 15% over the previous year.
We generally like to see a little revenue growth, but the modest EPS growth gives us some relief. These two metrics are moving in different directions, so while it’s hard to be confident judging performance, we think the stock is worth watching. We don’t have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Has The Cato Corporation Been A Good Investment?
Since shareholders would have lost about 45% over three years, some The Cato Corporation investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.
In Summary…
As previously discussed, John is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. While we have not been overly impressed by the business performance, the shareholder returns have been utterly depressing, over the last three years. And the situation doesn’t look all that good when you see John is remunerated higher than the industry average. With such poor returns, we would understand if shareholders had concerns related to the CEO’s pay.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company’s key performance areas. In our study, we found 3 warning signs for Cato you should be aware of, and 1 of them is a bit unpleasant.
Important note: Cato is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
Promoted
If you’re looking to trade Cato, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.