TJX Companies (NYSE:TJX) and Cato (NYSE:CATO) Head-To-Head Review

Cato (NYSE:CATO) and TJX Companies (NYSE:TJX) are both consumer discretionary companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, valuation, institutional ownership, analyst recommendations, dividends, earnings and profitability.

Insider & Institutional Ownership

61.1% of Cato shares are held by institutional investors. Comparatively, 91.1% of TJX Companies shares are held by institutional investors. 18.3% of Cato shares are held by insiders. Comparatively, 0.2% of TJX Companies shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Profitability

This table compares Cato and TJX Companies’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Cato	-0.87%	-3.39%	-1.29%
TJX Companies	9.73%	56.56%	15.92%

Dividends

Cato pays an annual dividend of $0.51 per share and has a dividend yield of 20.6%. TJX Companies pays an annual dividend of $1.92 per share and has a dividend yield of 1.5%. Cato pays out -170.0% of its earnings in the form of a dividend. TJX Companies pays out 35.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. TJX Companies has increased its dividend for 5 consecutive years. Cato is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares Cato and TJX Companies”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Cato	$643.67 million	0.08	-$5.91 million	($0.30)	-8.23
TJX Companies	$60.37 billion	2.30	$5.49 billion	$5.41	23.30

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

Volatility & Risk

Cato has a beta of 0.53, meaning that its share price is 47% less volatile than the S&P 500. Comparatively, TJX Companies has a beta of 0.6, meaning that its share price is 40% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings for Cato and TJX Companies, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cato	1	0	0	0	1.00
TJX Companies	0	4	16	2	2.91

TJX Companies has a consensus price target of $171.63, suggesting a potential upside of 36.16%. Given TJX Companies’ stronger consensus rating and higher possible upside, analysts plainly believe TJX Companies is more favorable than Cato.

Summary

TJX Companies beats Cato on 15 of the 18 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 TJX Companies

The TJX Companies, Inc., together with its subsidiaries, operates as an off-price apparel and home fashions retailer in the United States, Canada, Europe, and Australia. It operates through four segments: Marmaxx, HomeGoods, TJX Canada, and TJX International. The company sells family apparel, including footwear and accessories; home fashions, such as home basics, furniture, rugs, lighting products, giftware, soft home products, decorative accessories, tabletop, and cookware, as well as expanded pet, and gourmet food departments; jewelry and accessories; and other merchandise. It offers its products through stores and e-commerce sites. The TJX Companies, Inc. was incorporated in 1962 and is headquartered in Framingham, Massachusetts.