While Serenity shows CATO as meeting Graham defensive criteria. NASDAQ analysis
finds these reasons why it fails.


The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. CATO's P/E of 28.18 (using the current PE) fails this test.


The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. CATO's Price/Book ratio is 0.94, while the P/E is 0. CATO fails the Price/Book test.

Please advise.


Dear Eli,

Thank you for your forum post!

In the P/E test, the NASDAQ analysis seems to be using the current P/E even though it mentions the need to use three year averages.

IN the P/B test, the NASDAQ analysis seems to incorrectly be using a P/E of 0.

Graham Resources