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J.C. Penney (JCP) Off To A Strong Start In Pre-Market Activity

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified J.C. Penney ( JCP) as a pre-market leader candidate. In addition to specific proprietary factors, Trade-Ideas identified J.C. Penney as such a stock due to the following factors:

  • JCP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $377.3 million.
  • JCP traded 273,154 shares today in the pre-market hours as of 9:04 AM.
  • JCP is up 2.4% today from yesterday's close.

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More details on JCP:

J. C. Penney Company, Inc., through its subsidiary, J. C. Penney Corporation, Inc., operates department stores. It sells family apparel and footwear, accessories, fine and fashion jewelry, beauty products, and home furnishings. Currently there are 3 analysts that rate J.C. Penney a buy, 5 analysts rate it a sell, and 12 rate it a hold.

The average volume for J.C. Penney has been 29.3 million shares per day over the past 30 days. J.C. Penney has a market cap of $2.5 billion and is part of the services sector and retail industry. The stock has a beta of 1.63 and a short float of 84% with 3.01 days to cover. Shares are down 9.4% year-to-date as of the close of trading on Wednesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates J.C. Penney as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and poor profit margins.

Highlights from the ratings report include:

  • Currently the debt-to-equity ratio of 1.81 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, JCP has a quick ratio of 0.53, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • 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.
  • Net operating cash flow has decreased to $383.00 million or 40.62% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • 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 64.70%, 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. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The gross profit margin for PENNEY (J C) CO is currently lower than what is desirable, coming in at 28.40%. Regardless of JCP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.92% trails the industry average.

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