JCPenney (NYSE:JCP) is a department store that has had some serious trouble. The stock has rebounded from an all-time low of $4.90, doubling in price, and has had some decent Q2 news considering how poorly the business has done. Hindsight is always 20/20, so there's no use in kicking yourself about not buying when JCP was at its lowest point. I didn't buy and still wouldn't touch this company with a ten-foot pole.
The company has $5 billion in debt and pays $400 million in interest. To fund the "recovery," JCP couldn't rely on increasing sales and increasing the efficiency in its operations. JCP had to borrow more, which isn't always a bad thing, but the company isn't attracting as many customers as it once did. It was able to increase revenue 6% over last year, but this isn't going to make the company a good buy. Priced at book value, with -$11 free cash flow per share, this company is toxic to value investors. I think it is sad when the only good news an analyst can point to is the fact that a company didn't lose as much as it did last quarter. JCP is losing less, but still isn't making a profit. Losing less is good; actually making money is much better.
- Warning! GuruFocus has detected 2 Warning Signs with JCP. Click here to check it out.
- JCP 15-Year Financial Data
- The intrinsic value of JCP
- Peter Lynch Chart of JCP
I just don't see the value an investor would have in owning a stock that loses money and has difficulty gaining customers. To add to these shortcomings, the debt and interest payments it has would wipe away any chance at getting out of the hole it's in. Maybe I lack vision, but it doesn't look like the company is going to turn things around any time soon. There is nothing revolutionary about what JCP does, and there isn't anything in the financials that supports this company being priced at $10 a share or at $0.01 a share. Speculators can bet on this stock to decline or increase. Investors should take their hard-earned money elsewhere.