Chico’s FAS (NYSE: CHS) and Cato Corporation (The) (NYSE:CATO) are both small-cap retail/wholesale companies, but which is the better investment? We will compare the two companies based on the strength of their risk, institutional ownership, profitability, earnings, valuation, analyst recommendations and dividends.
Institutional and Insider Ownership
88.4% of Cato Corporation (The) shares are owned by institutional investors. 3.0% of Chico’s FAS shares are owned by insiders. Comparatively, 9.0% of Cato Corporation (The) 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.
Chico’s FAS pays an annual dividend of $0.33 per share and has a dividend yield of 4.0%. Cato Corporation (The) pays an annual dividend of $1.32 per share and has a dividend yield of 9.7%. Chico’s FAS pays out 45.8% of its earnings in the form of a dividend. Cato Corporation (The) pays out 206.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Chico’s FAS has increased its dividend for 7 consecutive years and Cato Corporation (The) has increased its dividend for 7 consecutive years.
Valuation and Earnings
This table compares Chico’s FAS and Cato Corporation (The)’s gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Chico’s FAS||$2.36 billion||0.44||$260.00 million||$0.72||11.54|
|Cato Corporation (The)||$876.41 million||0.38||$34.92 million||$0.64||21.22|
Chico’s FAS has higher revenue and earnings than Cato Corporation (The). Chico’s FAS is trading at a lower price-to-earnings ratio than Cato Corporation (The), indicating that it is currently the more affordable of the two stocks.
Risk & Volatility
Chico’s FAS has a beta of 0.63, indicating that its stock price is 37% less volatile than the S&P 500. Comparatively, Cato Corporation (The) has a beta of 1.13, indicating that its stock price is 13% more volatile than the S&P 500.
This is a summary of current recommendations and price targets for Chico’s FAS and Cato Corporation (The), as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Cato Corporation (The)||0||1||0||0||2.00|
Chico’s FAS currently has a consensus price target of $12.55, suggesting a potential upside of 50.97%. Cato Corporation (The) has a consensus price target of $20.00, suggesting a potential upside of 47.28%. Given Chico’s FAS’s stronger consensus rating and higher possible upside, equities analysts clearly believe Chico’s FAS is more favorable than Cato Corporation (The).
This table compares Chico’s FAS and Cato Corporation (The)’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Cato Corporation (The)||1.92%||4.37%||2.86%|
Chico’s FAS beats Cato Corporation (The) on 11 of the 16 factors compared between the two stocks.
Chico’s FAS Company Profile
Chico’s FAS, Inc. is an omni-channel specialty retailer of women’s private branded, casual-to-dressy clothing, intimates and accessories, operating under the Chico’s, White House Black Market (WHBM) and Soma brand names. The Company is also engaged in the sale of merchandise in its domestic and international retail stores. The Chico’s brand sells private branded clothing focusing on women 45 and older. Chico’s apparel includes the Black Label, Zenergy and Travelers collections. The WHBM brand sells private branded clothing focusing on women 35 and older. WHBM sells clothing and accessory items, including everyday basics, wear-to-work, denim and occasion. It offers black and white color palette. The accessories at WHBM include shoes, belts, scarves, handbags and jewelry. The Soma brand sells private branded lingerie, sleepwear, loungewear, activewear and beauty products focusing on women 35 and older. The lingerie category includes bras, panties, shapewear and swimwear.
Cato Corporation (The) Company Profile
The Cato Corporation is a fashion specialty retailer. The Company’s merchandise lines include dressy, career, and casual sportswear, dresses, coats, shoes, lingerie, costume jewelry, handbags, men’s wear and lines for kids and newborns. The Company has two segments: the operation of a fashion specialty stores segment (Retail Segment) and a credit card segment (Credit Segment). The Company operated its women’s fashion specialty retail stores in 33 states as of January 28, 2017, principally in the southeastern United States. The Company offers its own credit card to its customers and all credit authorizations, payment processing, and collection efforts are performed by a separate subsidiary of the Company. The Company’s stores offer an assortment of on-trend apparel and accessory items in primarily junior/missy, plus sizes, men’s and kids sizes with a focus on color, product coordination and selection.
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