Today's Perilous Reversal Stock: JC Penney (JCP)

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 "perilous reversal" (up big yesterday but down big today) 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 $140.1 million.
  • JCP has traded 779,830 shares today.
  • JCP is down 3% today.
  • JCP was up 20.3% yesterday.

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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 2 analysts that rate JC Penney a buy, 6 analysts rate it a sell, and 8 rate it a hold.

The average volume for JC Penney has been 16.1 million shares per day over the past 30 days. JC Penney has a market cap of $2.0 billion and is part of the services sector and retail industry. The stock has a beta of 1.91 and a short float of 36.7% with 5.67 days to cover. Shares are up 1.2% year-to-date as of the close of trading on Tuesday.

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 and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The debt-to-equity ratio is very high at 2.23 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • 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 25.72%, 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 company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength 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.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.6%. Since the same quarter one year prior, revenues slightly dropped by 0.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • PENNEY (J C) CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PENNEY (J C) CO reported poor results of -$6.07 versus -$4.49 in the prior year. This year, the market expects an improvement in earnings (-$2.58 versus -$6.07).

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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