JC Penney (JCP) Stock Storming The Castle Today

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 JC Penney ( JCP) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified JC 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 $192.2 million.
  • JCP has traded 35.6 million shares today.
  • JCP is trading at 2.21 times the normal volume for the stock at this time of day.
  • JCP crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on JCP:

J. C. Penney Company, Inc., through its subsidiary, J. C. Penney Corporation, Inc., sells merchandise through department stores in the United States. Currently there are 3 analysts that rate JC Penney a buy, 3 analysts rate it a sell, and 13 rate it a hold.

The average volume for JC Penney has been 22.8 million shares per day over the past 30 days. JC Penney has a market cap of $2.8 billion and is part of the services sector and retail industry. The stock has a beta of 1.60 and a short float of 32.1% with 4.35 days to cover. Shares are down 5.9% 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 JC 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 51.45%, 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.

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