Tilly’s (NYSE:TLYS) versus Cato (NYSE:CATO) Financial Analysis

Tilly’s (NYSE:TLYS) and Cato (NYSE:CATO) are both small-cap retail/wholesale companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, risk, profitability, valuation, analyst recommendations, dividends and institutional ownership.

Risk & Volatility

Tilly’s has a beta of 1.44, meaning that its stock price is 44% more volatile than the S&P 500. Comparatively, Cato has a beta of 0.78, meaning that its stock price is 22% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Tilly’s	-8.28%	-48.33%	-12.92%
Cato	-2.93%	-11.23%	-4.33%

Insider & Institutional Ownership

76.4% of Tilly’s shares are held by institutional investors. Comparatively, 61.1% of Cato shares are held by institutional investors. 2.8% of Tilly’s shares are held by insiders. Comparatively, 18.1% of Cato shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of current recommendations for Tilly’s and Cato, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Tilly’s	1	3	0	1	2.20
Cato	1	0	0	0	1.00

Tilly’s presently has a consensus target price of $2.25, suggesting a potential upside of 80.72%. Given Tilly’s’ stronger consensus rating and higher possible upside, analysts plainly believe Tilly’s is more favorable than Cato.

Earnings and Valuation

This table compares Tilly’s and Cato”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Tilly’s	$549.60 million	0.07	-$46.23 million	($1.52)	-0.82
Cato	$650.83 million	0.10	-$18.06 million	($1.01)	-3.43

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

Summary

Cato beats Tilly’s on 8 of the 14 factors compared between the two stocks.

About Tilly’s

Tilly’s, Inc. engages in the retail of casual apparel, footwear, and accessories. Its stores are located in retail centers, including malls, lifestyle centers, power centers, community centers, outlet centers, and street-front locations. The company was founded by Hezy Shaked and Tilly Levine in 1982 and is headquartered in Irvine, CA.

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.