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

J.C. Penney Company, Inc. (NYSE:JCP) has been in a period of decline over the past several years as department stores in general have been forced to contend with competition from Internet retailers such as Amazon as well as discount retailers including Target and Wal-Mart. Its stock price is down 46% in the last year. Even billionaire Bill Ackman’s involvement as an activist, helping name Ron Johnson to be J.C. Penney Company, Inc. (NYSE:JCP)’s CEO, has failed to turn around the company and in fact conditions for the company have continued to worsen.

The first quarter of J.C. Penney Company, Inc. (NYSE:JCP)’s fiscal year ended in early May 2013. Revenue fell by 16% versus a year earlier, essentially matching the decline in comparable store sales- a remarkably steep decline for a department store. Operating and net losses were more than double what they had been in the prior year period, and in this quarter alone the company lost $1.58 per share. Cash flow from operations was also negative, forcing J.C. Penney to draw on their short term borrowing capabilities.

Wall Street analysts expect the company to lose $3.17 per share in the current fiscal year (note that this implies a significant improvement for the rest of the year, as J.C. Penney Company, Inc. (NYSE:JCP) is effectively halfway to that point after just one quarter). There’s then quite a spread of forecasts for the forward fiscal year, which ends in January 2015. While some on the sell-side have the company breaking into the black, the average figure is a loss of $1.29 per share in that year as well. 25% of J.C. Penney’s float is held short as many market players consider it overvalued at the current price, and the factors driving the company’s weak performance certainly do not seem to be moderating.

Insider Monkey tracks quarterly 13F filings from hundreds of hedge funds and other notable investors as part of our work researching investment strategies (we have discovered, for example, that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year). We can also use this database to track interest in individual stocks; for example, Tiger Global Management initiated a position of 5.4 million shares in J.C. Penney Company, Inc. (NYSE:JCP) during the first quarter of 2013 (see Tiger Global’s stock picks). Of course, the retailer is one of Pershing Square’s significant holdings as well (find Ackman’s favorite stocks).