JC Penney (JCP) Is Today's Dead Cat Bounce Stock

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.

Trade-Ideas LLC identified JC Penney ( JCP) as a "dead cat bounce" (down big yesterday but up 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 $155.1 million.
  • JCP has traded 1.8 million shares today.
  • JCP is up 3.2% today.
  • JCP was down 7.7% 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 9 rate it a hold.

The average volume for JC Penney has been 13.2 million shares per day over the past 30 days. JC Penney has a market cap of $2.7 billion and is part of the services sector and retail industry. The stock has a beta of 1.77 and a short float of 33.6% with 5.00 days to cover. Shares are up 34.4% year-to-date as of the close of trading on Thursday.

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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 3.05 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • In its most recent trading session, JCP has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • 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.
  • Net operating cash flow has increased to -$226.00 million or 16.60% when compared to the same quarter last year. Despite an increase in cash flow, PENNEY (J C) CO's cash flow growth rate is still lower than the industry average growth rate of 31.80%.
  • 36.44% is the gross profit margin for PENNEY (J C) CO which we consider to be strong. It has increased from the same quarter the previous year.

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