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 deteriorating net income, disappointing return on equity, poor profit margins, weak operating cash flow and generally high debt management risk.

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Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Multiline Retail industry. The net income has significantly decreased by 1150.0% when compared to the same quarter one year ago, falling from $14.00 million to -$147.00 million.
  • 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 33.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -4.90% trails that of the industry average.
  • Net operating cash flow has significantly decreased to -$32.00 million or 126.66% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • JCP's debt-to-equity ratio of 0.86 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.44 is very low and demonstrates very weak liquidity.

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 $4.75 billion and is part of the services sector and retail industry. The company has a P/E ratio of -8.8, below the S&P 500 P/E ratio of 17.7. Shares are down 41.3% year to date as of the close of trading on Friday.

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.

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