Cato (NYSE:CATO – Get Free Report) and Citi Trends (NASDAQ:CTRN – Get Free Report) are both small-cap retail/wholesale companies, but which is the superior investment? We will contrast the two businesses based on the strength of their profitability, risk, dividends, valuation, analyst recommendations, earnings and institutional ownership.
Risk & Volatility
Cato has a beta of 0.59, indicating that its share price is 41% less volatile than the S&P 500. Comparatively, Citi Trends has a beta of 2.16, indicating that its share price is 116% more volatile than the S&P 500.
Earnings & Valuation
This table compares Cato and Citi Trends”s revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Cato | $649.81 million | 0.10 | -$18.06 million | ($0.50) | -6.80 |
| Citi Trends | $753.08 million | 0.51 | -$43.17 million | ($2.00) | -22.94 |
Cato has higher earnings, but lower revenue than Citi Trends. Citi Trends is trading at a lower price-to-earnings ratio than Cato, indicating that it is currently the more affordable of the two stocks.
Analyst Ratings
This is a summary of recent ratings and price targets for Cato and Citi Trends, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Cato | 1 | 0 | 0 | 0 | 1.00 |
| Citi Trends | 1 | 0 | 2 | 0 | 2.33 |
Citi Trends has a consensus target price of $39.50, indicating a potential downside of 13.91%. Given Citi Trends’ stronger consensus rating and higher probable upside, analysts plainly believe Citi Trends is more favorable than Cato.
Insider and Institutional Ownership
61.1% of Cato shares are owned by institutional investors. 18.1% of Cato shares are owned by insiders. Comparatively, 10.7% of Citi Trends shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.
Profitability
This table compares Cato and Citi Trends’ net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Cato | -1.38% | -5.46% | -2.04% |
| Citi Trends | -2.05% | -22.64% | -5.59% |
Summary
Cato beats Citi Trends on 8 of the 14 factors compared between the two stocks.
About Cato
The Cato Corporation, together with its subsidiaries, operates as a specialty retailer of fashion apparel and accessories primarily in the southeastern United States. It operates through two segments, Retail and Credit. The company's stores and e-commerce websites offer a range of apparel and accessories, including dressy, career, and casual sportswear; and dresses, coats, shoes, lingerie, costume jewelry, and handbags, as well as men's wear, and lines for kids and infants. It operates its stores and e-commerce websites under the Cato, Cato Fashions, Cato Plus, It's Fashion, It's Fashion Metro, and Versona names. It also provides credit card services to its customers, as well as layaway plans for customers. The Cato Corporation was incorporated in 1946 and is headquartered in Charlotte, North Carolina.
About Citi Trends
Citi Trends, Inc. operates as a value retailer of fashion apparel, accessories, and home goods. The company offers apparel, such as fashion sportswear and footwear for men and ladies, as well as apparel for kids, including newborns, infants, toddlers, boys, and girls; sleepwear, lingerie, and scrubs for ladies; and kids uniforms and accessories. It also provides accessories and beauty products that include handbags, luggage, hats, belts, sunglasses, jewelry, and watches, as well as offers outerwear for men and women. In addition, the company offers home and lifestyle products comprising home products for the bedroom, bathroom, kitchen, and decorative accessories; and food, tech, team sports, health and products, as well as seasonal items, books, and toys. Citi Trends, Inc. provides its products primarily to African American and multicultural families in the United States. The company was formerly known as Allied Fashion, Inc. and changed its name to Citi Trends, Inc. in 2001. Citi Trends, Inc. was founded in 1946 and is headquartered in Savannah, Georgia.
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