Head to Head Review: Cato (NYSE:CATO) vs. Tandy Leather Factory (NASDAQ:TLF)

Tandy Leather Factory (NASDAQ:TLF) and Cato (NYSE:CATO) are both small-cap retail/wholesale companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, valuation, earnings, analyst recommendations, institutional ownership, profitability and risk.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Tandy Leather Factory and Cato, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Tandy Leather Factory	1	0	0	0	1.00
Cato	1	0	0	0	1.00

Profitability

This table compares Tandy Leather Factory and Cato’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Tandy Leather Factory	-2.94%	-4.31%	-2.74%
Cato	0.01%	0.05%	0.02%

Institutional & Insider Ownership

56.4% of Tandy Leather Factory shares are held by institutional investors. Comparatively, 61.1% of Cato shares are held by institutional investors. 36.2% of Tandy Leather Factory shares are held by company insiders. Comparatively, 18.3% of Cato shares are held 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.

Volatility & Risk

Tandy Leather Factory has a beta of 0.48, meaning that its stock price is 52% less volatile than the S&P 500. Comparatively, Cato has a beta of 0.59, meaning that its stock price is 41% less volatile than the S&P 500.

Earnings and Valuation

This table compares Tandy Leather Factory and Cato”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Tandy Leather Factory	$76.94 million	0.24	$9.10 million	($0.24)	-9.63
Cato	$653.81 million	0.10	-$5.91 million	($0.01)	-319.70

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

Summary

Cato beats Tandy Leather Factory on 7 of the 11 factors compared between the two stocks.

About Tandy Leather Factory

Tandy Leather Factory, Inc. engages in the distribution of leather and related products. It offers leather, leatherworking tools, buckles and adornments for belts, leather dyes and finishes, saddle and tack hardware, and do-it-yourself kits. It operates through North America and International geographical segments. The North America geographical segment consists of 115 stores, which offer a broad selection of products combined with leathercraft expertise in a one-stop shop. The International geographical segment comprises of similar to North America segment but generally located in light industrial areas. The company was founded by J. Wray Thompson, Sr. and Ronald C. Morgan in 1980 and is headquartered in Fort Worth, TX.

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.