JCPenney: A Cheap Stock?

09/06/2017 2:54 am EST

Focus: CONSUMER

Bill Mathews

Editor & Founder, The Cheap Investor

J. C. Penney Company (JCP) is one of the nation`s largest apparel and home furnishings retailers, notes Bill Mathews, a specialist in low-priced stocks and editor of The Cheap Investor.


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It combines an expansive footprint of approximately 875 stores across the United States and Puerto Rico with a powerful e-commerce site, jcp.com, to connect with shoppers how, when and where they prefer to shop.

JCPenney has 100,000 associates across the globe, all driving toward the Company`s three strategic priorities of strengthening private brands, becoming a world-class omni-channel retailer and increasing revenue per customer.

We’ve followed JCPenney for years. In January 2016, we reviewed the stock when it fell to $6.00 after announcing negative holiday sales when compared to very good holiday sales the previous year.

We decided to hold off recommending the stock, in hopes of catching the stock at a low point, so our subscribers can start accumulating shares. With the stock currently selling at $3.77, we think this is our opportunity.

The company has a pretty good balance sheet with about $314 million (about $1 per share) in cash, book value of $3.90 per share and total debt of $4.6 billion. Insiders own about 1% of the 311 million shares outstanding, and 343 institutions own 73% of the float.

Institutions sold about 21 million more shares than they bought for the quarter ended June 30, 2017. However, the top two institutional investors — BlackRock (owning 38 million shares) and Vanguard (owning 28 million shares) — bought 16 million shares in that quarter.

JCPenney has been a staple in the retail sector since 1902. Like other big-name, long-lived companies, JCPenney has had to adapt to changes in its industry; and we are sure that the company can do it again. It has already closed 127 unprofitable stores, and despite the closings, revenues were up 1.5%.

If JCPenney successfully restructures and returns to profitability, the stock has the potential to move up 100% or more. Just be aware that, at its current low price, the stock is speculative; and the restructuring may take a while.

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