Cathay General Bancorp (Nasdaq: CATY) – Cathay General is a traditional retail bank that offers deposit accounts and lending products to customers. It offers its products to individuals as well as businesses. The company was founded in 1962 as Cathay Bancorp and changed its name to Cathay General Bancorp in 2003. The company is headquartered in Los Angeles.
Cathay’s earnings have been growing nicely in recent years and in recent quarters. The average annual growth rate over the last three years has been 19% per year.
Cathay is scheduled to release first quarter earnings results on April 16, so you will want to keep an eye on that report.
The company’s sales have grown nicely as well.
In the last three years sales have increased by an average of 14% per year and they were up by 17% in the fourth quarter.
Cathay’s management efficiency measurements are somewhat mixed with the return on equity average at 13.5%, but the profit margin is well above average at 47.8%.
One of the things that really got my attention about Cathay was the sentiment toward the stock.
There are only eight analysts following the stock and only three of them rate the stock as a “buy” while the other five rate the stock as a “hold”. The short interest ratio for Cathay is at 5.15 and that is higher than the average stock. This bearish sentiment toward the stock means there are investors and analysts that can be flipped to the bullish side and that could help drive the stock up.
Looking at the weekly chart for Cathay, the $32 level really stood out as a key level. The stock dropped down to that area back in December before bouncing back up. The stock fell again in recent weeks and once again the $32 area appears to have acted as support. If you look all the way back to the end of 2015, the $32 area acted as resistance for the stock. In many instances a resistance level acts as support once a stock breaks through the level.
Suggested strategy: Buy CATY with a maximum entry price of $36.00. I would set a target of at least $46.00 over the next 6 to 9 months (for a potential return of 30% from here). I would also suggest a stop at $31.00.
— Rick Pendergraft