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Something Strange In J.C. Penney Company, Inc. (NYSE:JCP) Current Valuation

Boston, MA 11/29/2013 (wallstreetpr) – The question to begin with is how far J.C. Penney Company, Inc. (NYSE:JCP) is from recovery? To answer this question, another question would be asked about what true recovery of the retail chain means. Without dispute, most everyone agrees that the company needs to get to its performance levels of 2010. That was the period the retailer flew highest before dropping like a rock. In 2010, J.C. Penney Company, Inc. (NYSE:JCP)’s stock closed around $32 per share. At the close of that fiscal year, the retailer had about $5.7 billion in revenue with profits running close to $270 million.

Today, J.C. Penney Company, Inc. (NYSE:JCP) stock is trading around $10 per share which on the face value would mean that it’s trading $22 shy of the 2010 closing. Again, the company has been lately reporting losses instead of profits and this means nothing but the fact that JCP has a lot of ground to cover in the category of revenue and expenses reduction.

However, you can only buy the above arguments, especially the first one on stock price if you refuse to consider the effect of dilutive shares. The company recently made a secondary offering of about 68 million shares, effectively doubling its shares outstanding. If this be the case, then here is the truth; that at $10 per share presently, J.C. Penney Company, Inc. (NYSE:JCP) is actually at $25 per share before secondary offering.

In other words, since the stock traded around $32 per share at the close of 2010, that share valuation equates $16 per share after doubling of the stock in the secondary offering. As such, it simply means that the company has made commendable steps in category of valuation.

The weakness though can still be seen in its revenue which if to be matched with 2010 levels, the company needs to realize more than 40% revenue growth in the next quarter. This is not only beyond any estimates, but also practically impossible in the upcoming months considering that the store is even struggling to increase its foot traffic. Nonetheless, if valuation has peaked at the levels indicated, there is no reason to doubt that overall recovery is just a matter of time.

Published by Lisa Ray

Lisa has a Bachelor of Arts in journalism from Purdue University and 3 years of experience in the publishing field.



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