CATY

We rate CATHAY GENERAL BANCORP (CATY) as a Reduce with a composite score of 48.9/100 at a current price of $51.18. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in momentum (63th percentile) and stability (55th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (32th percentile) and investment (43th percentile) tempers our overall conviction. We assign a Narrow Moat rating (43/100), Low uncertainty, and Exemplary capital allocation.

Key items to watch: quarterly earnings execution and sector-level competitive dynamics. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

CATHAY GENERAL BANCORP holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 48.9/100 places it at rank #2174 in our full 7,333-stock universe. At $3.3B in market capitalization, CATHAY GENERAL BANCORP is a mid-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 13% and favorable momentum (63th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 0% (-76.5pp vs sector) narrow to operating margins of 664% (+646.6pp vs sector) and net margins of 545.6%, yielding a gross-to-net conversion rate of N/A%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $51.18, CATHAY GENERAL BANCORP is trading near fair value based on current fundamentals. Our value factor score of 45/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 12.3x (roughly in line with the sector median of 11.9x), EV/EBITDA of 10.5x (at a premium), P/B of 1.2x, P/S of 66.9x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Low uncertainty rating to CATHAY GENERAL BANCORP. The company exhibits strong financial stability with a beta of 0.93, conservative leverage (4% D/E), and a stability factor in the 55th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: weak quality scores (32th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 55th percentile and quality factor at the 32th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: conservative leverage (4% D/E) limits balance sheet risk; a 2.83% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate CATHAY GENERAL BANCORP's capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by disciplined leverage (4% D/E), a 2.83% dividend yield, best-in-class net margins of 545.6%. Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — CATHAY GENERAL BANCORP approaches this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. The company returns capital via a 2.83% dividend yield, and the combination of 1.2% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, CATHAY GENERAL BANCORP receives a Reduce rating with a composite score of 48.9/100 (rank #2174 of 7,333). Our quantitative framework assigns a Narrow Moat (43/100, trend: stable), Low uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 48/100.

Our analysis does not support a constructive view on CATHAY GENERAL BANCORP at this time. The combination of the current quantitative profile, low uncertainty, and exemplary capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.