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

Analyst RecommendationAfter careful consideration and research of the J.C. Penny Company,including an industry analysis, accounting analysis, financial analysis, forecastingand future financial statements, and valuation model conclusions, we considerthe firm to be highly overvalued and should be set to sell.Assumptions used to calculate all relevant information were takenconsidering past financials of the company as well as four other competitors,Stein Mart, Kohl’s, Dillard’s, and Stage Stores, Inc. This department retailindustry is very highly concentrated with relevant competition set as those whotake advantage of similar key success factors such as economies of scale andscope, supplier relationships, and brand creation within different stores.Looking at accounting ratios, J. C. Penney held the standard of theindustry and even surpassed many competitors in respect to sales beingsupported by business happenings. There were no problems found or anyindication that financial statements have been manipulated to reflect betternumbers in the last five years of the business. Appropriate values were reflectedin the years where J. C. Penney sold unprofitable assets, and again reveal theturnaround after the fact. If anything, disclosure has only improved year byyear, making the company fairly easy to value. As for financial ratios, wedeemed that J.C. Penney overall had a superior performance over the market.When forecasting the financial statements of the company, not only weretrends of the past five years of the company used, but also that of thecompetitors. We feel the growth percentage used was fairly chosen, if not alittle conservative in estimation, and gives an accurate look into the future.Even though no real problems were found and the company seems to flyabove the competition on many aspects, the valuation models used based off ofthese future forecasts show that the company is overvalued. Even after deeming127