J. C. Penney Company, Inc. Equity Valuation and Analysis As of ...

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ConclusionOverall, it appears that J. C. Penney’s productivity is beginning toconverge with that of the industry averages. Although the company took a “bigbath” in 2004 with the selling of Eckerd therefore decreasing their asset base,they have begun to make a comeback. They are maintaining constant levels ofgrowth while decreasing their total liabilities and increasing their equity. Thisgives us confidence in our future predictions and optimism that J. C. Penney willcontinue to grow and prosper within the next ten years.101
Analysis of ValuationsThere are several valuation methods that can be used to derive the shareprice of a company. Some of these methods are more accurate than othersbecause some are derived through theory while others are quick screeningmethods. The method of comparables helps us take a quick glance at the shareprice relative to the industry average. Based on this data, we can drawimmediate conclusions as to whether our company is overvalued, fairly valued,or undervalued. The intrinsic valuation models, on the other hand, help us comeup with a more reliable share price that can be used to more accurately valuethe firm. Using these valuations, we weighted the several methods from mostaccurate to least accurate to come up with a specific share price that we believeto show a more realistic picture.Method of ComparablesPriceTrailing P/E: $80.34Forward P/E: $75.64P.E.G.: $42.55P/B: $39.62P/EBITDA: $21.90P/FCF:N/A*EV/EBITDA: $72.17The method of comparables is a way to value a company by computing itsshare price based upon industry averages. It does so by comparing the firm’sratios with industry average ratios. We first took J. C. Penney’s financial dataused for these ratios and put them into a per share basis. We then did the samefor its competitors. By calculating each ratio, we derived an industry averagebased on the ratios computed for Dillard’s, Kohl’s, Stein Mart, and Stage Stores,102
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J. C. Penney Company, Inc. Equity V
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Industry AnalysisIn 1902, James Cas
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Financial Analysis, Forecast Financ
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Business & Industry AnalysisCompany
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Industry OverviewThe retail industr
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Five Forces ModelThe Five Forces Mo
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ConcentrationThe level of concentra
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capable of offering lower prices th
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If a firm wishes to shut down, it m
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Legal BarriersMany industries have
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These costs include issues such as
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Bargaining Power of SuppliersThe de
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The relative bargaining power of th
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Competitive StrategiesIn order to a
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Department stores have to focus on
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The Big PicturePlayers in this indu
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Lower Input CostsJ. C. Penney is at
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in the last five years. This trend
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convenient for different consumers
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transactions have been improperly s
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Penney does state in its annual rep
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Operating and Capital LeasesOperati
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Potential Accounting FlexibilityA f
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truly are. J. C. Penney, however, h
Page 52 and 53: Qualitative Analysis of DisclosureT
Page 54 and 55: we can see why targeting the strong
Page 56 and 57: manipulation diagnostics for J. C.
Page 58 and 59: Net Sales/Net Accounts ReceivableNe
Page 60 and 61: Net Sales/Unearned Revenue1200Net S
Page 62 and 63: Below is a chart of sales manipulat
Page 64 and 65: As for the industry, all the compan
Page 66 and 67: Pension Expense/SG&APension Expense
Page 68 and 69: Below is a chart of all expense man
Page 70 and 71: discount rates in respect to pensio
Page 72 and 73: Financial Analysis, Forecast Financ
Page 74 and 75: paying off their short-term obligat
Page 76 and 77: ecause many firms in this segment o
Page 78 and 79: Penney’s inventory turnover is in
Page 80 and 81: ConclusionAnalysis through liquidit
Page 82 and 83: operating efficiency because the fi
Page 84 and 85: Return on AssetsReturn on Assets0.1
Page 86 and 87: Capital Structure AnalysisWhen look
Page 88 and 89: however, in 2006, J. C. Penney show
Page 90 and 91: Sustainable Growth RateSustainable
Page 92 and 93: average of only years 2005 and 2006
Page 94 and 95: (reported in millions)Annual Income
Page 96 and 97: We then began to look at the equity
Page 98 and 99: Common Size Balance Sheet 2002 2003
Page 100 and 101: (numbers in millions)Statement of C
Page 104 and 105: Inc. We set these averages equal to
Page 106 and 107: Price to BookPPS BPS P/B IndustryAv
Page 108 and 109: Price Earnings GrowthPPS EPS PEG In
Page 110 and 111: y J. C. Penney’s EBITDA. Then we
Page 112 and 113: Regression Analysis3 Month Rate 72
Page 114 and 115: Intrinsic ValuationsIntrinsic valua
Page 116 and 117: amount in the eye’s of shareholde
Page 118 and 119: This particular stock price in our
Page 120 and 121: esidual income or converge. Future
Page 122 and 123: To find our long run return on equi
Page 124 and 125: Sensitivity AnalysisGrowth Rates0 -
Page 126 and 127: for this large difference between s
Page 128 and 129: Analyst RecommendationAfter careful
Page 130 and 131: AppendixLiquidity RatiosCurrent rat
Page 132 and 133: Capital Structure RatioDebt to equi
Page 134 and 135: SUMMARY OUTPUT3 Month Regression72
Page 136 and 137: SUMMARY OUTPUT6 Month Regression72
Page 138 and 139: SUMMARY OUTPUT2 Year Regression72 M
Page 140 and 141: SUMMARY OUTPUT5 Year Regression72 M
Page 142 and 143: SUMMARY OUTPUT10 Year Regression72
Page 144 and 145: Cost of Equity 0.1361Estimated Pric
Page 146 and 147: Discount Dividends Model0 1 2 3 4 5
Page 148 and 149: Residual Income Model WACC(AT) 0.07
Page 150 and 151: Z-Score AnalysisZ-Score=1.21.43.320
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J. C. Penney Company, Inc. Equity Valuation and Analysis As of ...

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