Analyzing Sportsman’s Warehouse (NASDAQ:SPWH) & Cato (NYSE:CATO)

Cato (NYSE:CATO) and Sportsman’s Warehouse (NASDAQ:SPWH) are both small-cap consumer discretionary companies, but which is the better stock? We will contrast the two businesses based on the strength of their risk, analyst recommendations, earnings, valuation, institutional ownership, dividends and profitability.

Valuation & Earnings

This table compares Cato and Sportsman’s Warehouse”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Cato	$653.81 million	0.07	-$5.91 million	($0.30)	-7.67
Sportsman’s Warehouse	$1.21 billion	0.03	-$50.06 million	($1.23)	-0.86

Cato has higher earnings, but lower revenue than Sportsman’s Warehouse. Cato is trading at a lower price-to-earnings ratio than Sportsman’s Warehouse, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Cato and Sportsman’s Warehouse, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cato	1	0	0	0	1.00
Sportsman’s Warehouse	1	2	1	0	2.00

Sportsman’s Warehouse has a consensus target price of $2.12, indicating a potential upside of 100.47%. Given Sportsman’s Warehouse’s stronger consensus rating and higher possible upside, analysts clearly believe Sportsman’s Warehouse is more favorable than Cato.

Profitability

This table compares Cato and Sportsman’s Warehouse’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Cato	-0.87%	-3.39%	-1.29%
Sportsman’s Warehouse	-3.94%	-10.50%	-2.29%

Institutional and Insider Ownership

61.1% of Cato shares are owned by institutional investors. Comparatively, 83.0% of Sportsman’s Warehouse shares are owned by institutional investors. 18.3% of Cato shares are owned by insiders. Comparatively, 3.8% of Sportsman’s Warehouse shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Volatility & Risk

Cato has a beta of 0.55, indicating that its stock price is 45% less volatile than the S&P 500. Comparatively, Sportsman’s Warehouse has a beta of 0.44, indicating that its stock price is 56% less volatile than the S&P 500.

Summary

Cato beats Sportsman’s Warehouse 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 Sportsman’s Warehouse

Sportsman’s Warehouse Holdings, Inc. engages in the retail of sporting and athletic goods. Its products include hunting and shooting, archery, fishing, camping, boating accessories, optics and electronics, knives and tools, and footwear. The company was founded in 1986 and is headquartered in West Jordan, UT.