Cato (NYSE: CATO) and The Talbots (NYSE:TLB) are both retail/wholesale companies, but which is the better investment? We will contrast the two businesses based on the strength of their analyst recommendations, dividends, earnings, profitability, institutional ownership, valuation and risk.

Dividends

Cato pays an annual dividend of $1.32 per share and has a dividend yield of 8.3%. The Talbots does not pay a dividend. Cato pays out 293.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Cato has raised its dividend for 7 consecutive years.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Cato and The Talbots, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cato 0 1 0 0 2.00
The Talbots 0 0 0 0 N/A

Cato presently has a consensus target price of $20.00, suggesting a potential upside of 25.94%.

Valuation and Earnings

This table compares Cato and The Talbots’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cato $956.57 million 0.39 $47.21 million $0.45 35.29
The Talbots N/A N/A N/A ($1.61) N/A

Cato has higher revenue and earnings than The Talbots. The Talbots is trading at a lower price-to-earnings ratio than Cato, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Cato and The Talbots’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cato 1.31% 3.04% 1.97%
The Talbots N/A N/A N/A

Insider and Institutional Ownership

87.6% of Cato shares are held by institutional investors. 9.6% of Cato shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Summary

Cato beats The Talbots on 9 of the 10 factors compared between the two stocks.

Cato 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.

The Talbots Company Profile

The Talbots Inc. is a United States-based company, which operates as a retailer and direct marketer of women’s clothing, shoes and accessories. The Company offers blazer, trench, white shirt, ballet flat and pearls. It sells its products through different outlets. It also provides e-commerce service and its website offers MyTalbots, which allows customers to register for benefits and customize their online shopping experience; Style by Design appointment shopping; Pearls of Wisdom, offering fashion advice and styling ideas; and a Find in Store feature, which enables customers to locate and reserve merchandise in any Talbots store.

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