Ann (NYSE: ANN) and Cato Corporation (The) (NYSE:CATO) are both cyclical consumer goods & services companies, but which is the superior investment? We will compare the two companies based on the strength of their profitability, analyst recommendations, risk, institutional ownership, dividends, valuation and earnings.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Ann and Cato Corporation (The), as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ann 0 0 1 0 3.00
Cato Corporation (The) 0 1 0 0 2.00

Ann presently has a consensus price target of $50.00, indicating a potential upside of 11.38%. Cato Corporation (The) has a consensus price target of $20.00, indicating a potential upside of 51.17%. Given Cato Corporation (The)’s higher possible upside, analysts plainly believe Cato Corporation (The) is more favorable than Ann.

Insider and Institutional Ownership

88.4% of Cato Corporation (The) shares are held by institutional investors. 9.0% of Cato Corporation (The) shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Dividends

Cato Corporation (The) pays an annual dividend of $1.32 per share and has a dividend yield of 10.0%. Ann does not pay 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. Cato Corporation (The) has raised its dividend for 7 consecutive years.

Valuation & Earnings

This table compares Ann 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
Ann N/A N/A N/A N/A N/A
Cato Corporation (The) $876.41 million 0.37 $34.92 million $0.64 20.67

Cato Corporation (The) has higher revenue and earnings than Ann.

Profitability

This table compares Ann and Cato Corporation (The)’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ann 2.27% 10.25% 5.10%
Cato Corporation (The) 1.92% 4.37% 2.86%

Summary

Ann beats Cato Corporation (The) on 7 of the 13 factors compared between the two stocks.

Ann Company Profile

ANN INC., through its wholly owned subsidiaries, is a specialty retailer of women’s apparel, shoes and accessories sold primarily under the Ann Taylor and LOFT brands. The Company operates in four segments: Ann Taylor, LOFT, Ann Taylor Factory and LOFT Outlet. The Company operates approximately 1,030 retail stores in 47 states of the United States, the District of Columbia, Puerto Rico and Canada, comprising 245 Ann Taylor stores, 537 LOFT stores, 116 Ann Taylor Factory stores, 127 LOFT Outlet stores and five Lou & Grey stores. In addition, the Company’s clients shop online in over 100 countries across the world at www.anntaylor.com and www.LOFT.com, and at three LOFT franchise locations in Mexico. The Company’s wholly owned subsidiary, AnnTaylor Distribution Services, Inc., owns its 256,000 square foot distribution center located in Louisville, Kentucky. The distribution center is located on approximately 29 acres.

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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