Head to Head Review: Children’s Place (NASDAQ:PLCE) & Cato (NYSE:CATO)

Cato (NYSE:CATO) and Children’s Place (NASDAQ:PLCE) are both small-cap retail/wholesale companies, but which is the better business? We will compare the two businesses based on the strength of their dividends, valuation, analyst recommendations, institutional ownership, profitability, risk and earnings.

Insider & Institutional Ownership

61.1% of Cato shares are owned by institutional investors. 18.1% of Cato shares are owned by company insiders. Comparatively, 0.6% of Children’s Place shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of recent ratings and target prices for Cato and Children’s Place, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cato	0	0	0	0	0.00
Children’s Place	0	1	0	0	2.00

Children’s Place has a consensus price target of $6.00, indicating a potential upside of 19.52%. Given Children’s Place’s stronger consensus rating and higher possible upside, analysts plainly believe Children’s Place is more favorable than Cato.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Cato	-4.02%	-14.71%	-5.80%
Children’s Place	-3.97%	-10.32%	-1.49%

Volatility and Risk

Cato has a beta of 0.8, suggesting that its share price is 20% less volatile than the S&P 500. Comparatively, Children’s Place has a beta of 1.72, suggesting that its share price is 72% more volatile than the S&P 500.

Valuation & Earnings

This table compares Cato and Children’s Place”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Cato	$649.81 million	0.09	-$18.06 million	($1.35)	-2.17
Children’s Place	$1.39 billion	0.08	-$57.82 million	($3.13)	-1.60

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

Summary

Children’s Place beats Cato on 8 of the 13 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 Children’s Place

The Children’s Place, Inc. engages in the provision of apparel, footwear, accessories, and other items for children. The firm also designs contracts to manufacture and sell fashionable and value-priced merchandise under the brand names of The Children’s Place, Baby Place, and Gymboree. It operates through The Children’s Place U.S. and The Children’s Place International segments. The Children’s Place U.S. segment refers to the company’s U.S. and Puerto Rico-based stores and revenue from its U.S. based wholesale business. The Children’s Place International segment is involved in the Canadian-based stores, revenue from the company’s Canadian-based wholesale business, as well as revenue from international franchisees. The company was founded by David Pulver and Clinton A. Clark in 1969 and is headquartered in Secaucus, NJ.