Is J.C. Penney Company, Inc. (JCP) a Good Investment?

One peer for J.C. Penney Company, Inc. (NYSE:JCP) is Kohl’s Corporation (NYSE:KSS). Kohl’s also struggled during its fiscal Q1, though results were at least somewhat better: sales were down “only” 1% compared to the same period in 2012 with a 5% decrease in net income. The department store is valued at trailing and forward earnings multiples of 13 and 11, respectively, so if it could manage to hold its profits steady then it could be a prospective value stock. However, at least for now, financials are weak enough that investors should be wary of depending on Kohl’s to maintain its current business and should probably shy away from buying.

In addition, Macy’s is valued at only a small premium to Kohl’s in terms of trailing earnings with a P/E multiple of 14. Analysts expect at least modest growth on the bottom line over the next several years, and as a result the forward earnings multiple is 11 with a five-year PEG ratio below 1. While investors shouldn’t be too confident that Macy’s will continue to grow its same store sales in revenue in what is such a challenging environment for its peers, its relative prosperity and only slightly higher valuation than Kohl’s does make it at least a potential value play.

As a result Macy’s appears to be a somewhat more interesting target than Kohl’s and certainly a less risky pick than J.C. Penney. While the latter retailer could certainly improve in the long term, analysts are generally expecting it to be unprofitable next year and considering how poorly revenue has been doing it does not seem worth buying.

Disclosure: I own no shares of any stocks mentioned in this article.