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, generally high debt management risk and feeble growth in its earnings per share.
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- 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 53.73%, 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.
- JCP's debt-to-equity ratio of 0.85 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 0.22 is very low and demonstrates very weak liquidity.
- 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).
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