J.C. Penney Co Inc Stock Sell Recommendation Reiterated (JCP)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK (TheStreet) -- J.C. Penney (NYSE:JCP) has been reiterated by TheStreet Ratings as a sell with a ratings score of D . The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

• EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass

Highlights from the ratings report include:

• Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Multiline Retail industry and the overall market, PENNEY (J C) CO's return on equity significantly trails that of both the industry average and the S&P 500.
• The gross profit margin for PENNEY (J C) CO is currently lower than what is desirable, coming in at 32.50%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -4.20% trails that of the industry average.
• JCP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 44.74%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
• PENNEY (J C) CO has improved earnings per share by 16.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PENNEY (J C) CO swung to a loss, reporting -$0.73 versus $1.59 in the prior year. For the next year, the market is expecting a contraction of 82.2% in earnings (-$1.33 versus -$0.73).
• The revenue fell significantly faster than the industry average of 4.1%. Since the same quarter one year prior, revenues fell by 26.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

J. C. Penney Company, Inc., through its subsidiary, J. C. Penney Corporation, Inc., operates department stores in the United States and Puerto Rico. The company sells family apparel and footwear, accessories, fine and fashion jewelry, beauty products, and home furnishings. J.C. Penney has a market cap of $4.21 billion and is part of the services sector and retail industry. Shares are up 6.6% year to date as of the close of trading on Wednesday.

You can view the full J.C. Penney Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

It's Official: Action Alerts PLUS beats the S&P 500 with Dividends Reinvested! Cramer and Link were up 16.72% in 2012. Were you? See what they are trading for 14-days FREE

 

For more information on J.C. Penney Co Inc click any of the following:

• J.C. Penney Co Inc Stock Price

• J.C. Penney Co Inc Analyst Ratings

• J.C. Penney Co Inc Key Stats & Profile

• J.C. Penney Co Inc Earnings

• J.C. Penney Co Inc Ratio Comparison

• J.C. Penney Co Inc Growth Rates

• J.C. Penney Co Inc Balance Sheet

• J.C. Penney Co Inc Cash Flow

• J.C. Penney Co Inc Income Statement