With shares of J.C. Penney Company (NYSE:JCP) trading at around $20.62, is JCP an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
To be blunt, there isn’t much good news here. Margins are weak, ROE is -12.96 percent over the past twelve months, online sales dropped 37 percent last quarter, dividend payments have been discontinued, the company laid off 4,700 employees in 2012, and 45.80 percent of the float is short. In addition to that, there are more analysts recommending Sell than Buy, and the Forward P/E is 229.11. Ouch!
It’s not easy to find good news for J.C. Penney, but if there’s a will there’s a way. Operating cash flow is $298 million. That’s not a lot for this situation, but it’s positive. Also, Martha Stewart Living Omnimedia (NYSE:MSO) will have an extensive line of products coming to J.C. Penney in March. Will this save the J.C. Penney? No. But it’s a plus.
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CEO Ron Johnson is not a popular fellow at the moment. His fair pricing approach isn’t working out, and it likely won’t work out in the end, but we have to admit that it’s possible that he will end up proving everyone wrong. Instead of guessing at how his strategy works out, let’s take a look at some important numbers for J.C. Penney.