Torrid (NYSE:CURV – Get Free Report) and Cato (NYSE:CATO – Get Free Report) are both small-cap retail/wholesale companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, valuation, risk, dividends, profitability and analyst recommendations.
Profitability
This table compares Torrid and Cato’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Torrid | -0.70% | N/A | -1.69% |
| Cato | -0.90% | -3.57% | -1.35% |
Institutional & Insider Ownership
81.8% of Torrid shares are owned by institutional investors. Comparatively, 61.1% of Cato shares are owned by institutional investors. 5.9% of Torrid shares are owned by company insiders. Comparatively, 18.3% of Cato shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.
Analyst Ratings
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Torrid | 3 | 4 | 1 | 0 | 1.75 |
| Cato | 1 | 0 | 0 | 0 | 1.00 |
Torrid presently has a consensus price target of $1.44, suggesting a potential downside of 7.99%. Given Torrid’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Torrid is more favorable than Cato.
Earnings and Valuation
This table compares Torrid and Cato”s revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Torrid | $1.00 billion | 0.16 | -$7.03 million | ($0.06) | -26.08 |
| Cato | $653.81 million | 0.09 | -$5.91 million | ($0.31) | -9.42 |
Cato has lower revenue, but higher earnings than Torrid. Torrid is trading at a lower price-to-earnings ratio than Cato, indicating that it is currently the more affordable of the two stocks.
Risk & Volatility
Torrid has a beta of 0.96, meaning that its stock price is 4% less volatile than the S&P 500. Comparatively, Cato has a beta of 0.55, meaning that its stock price is 45% less volatile than the S&P 500.
Summary
Torrid beats Cato on 10 of the 14 factors compared between the two stocks.
About Torrid
Torrid Holdings Inc. operates in women’s plus-size apparel and intimates market in North America. The company designs, develops, and merchandises its products under the Torrid, Torrid Curve, CURV, and Lovesick brand names. It is involved in the sale of tops, bottoms, dresses, denims, activewear, intimates, sleep wear, swim wear, and outerwear products; and non-apparel products comprising accessories, footwear, and beauty products. The company sells its products directly to consumers through its e-commerce platform and its physical stores. Torrid Holdings Inc. was incorporated in 2019 and is headquartered in City Of Industry, California.
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.
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