It's good to find largely unknown companies with clean balance sheets, good dividend payouts, strong returns on capital, and a focused market niche. Perhaps, then, Cato (NYSE:CTR) is a retailer that might appeal to some of the more patient value-type investors who can't see their way clear to pay up for the likes of Zumiez (NASDAQ:ZUMZ) or Chico's (NYSE:CHS).

For the fourth quarter, Cato reported that total sales rose about 6% as same-store sales grew about 2%. Margins improved significantly at both the gross and operating lines, and operating income jumped 41%. It's regrettable that the company did not provide a cash flow statement with its earnings release, but I would still be comfortable estimating that Cato grew structural free cash flow by at least a strong high-teens percentage.

In some respects, Cato is a sleepy retailer. It typically builds stores in strip malls that are anchored by large discounters like Wal-Mart (NYSE:WMT) or supermarkets like Kroger (NYSE:KR), and it's certainly not looking to play on the latest overpriced teen fad.

Sleepy though it may be, this company generates very strong returns on invested capital and has done so for a while. That has also translated into good cash flow. The company is debt-free, pays a nice dividend, and is self-funding its store expansion plans.

The biggest fly in the ointment here for me is that the company has a dual share structure that gives Class B owners disproportionately better voting rights. Management does not seem to be abusing this power -- salaries and options awards seem quite reasonable, and the company returns capital to shareholders -- but it's still something that we at the Fool don't generally like to see.

While this stock has had a good overall run since 1997, it has stalled a bit recently. A discounted cash flow valuation analysis doesn't suggest huge potential undervaluation here, but it's tough not to be a little interested in an operator with superior returns on capital and a disciplined management approach.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).