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

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Capital Structure RatioDebt to equity ratio2002 2003 2004 2005 2006JCP 1.805 2.373 1.909 2.110 1.955KSS 0.798 0.607 0.607 0.537 0.614DDS 4.070 3.747 2.705 2.516 1.947SSI 0.293 0.394 0.427 0.458 0.444SMRT 0.837 0.726 0.716 0.606 0.667Times interest earned2002 2003 2004 2005 2006JCP 15.961 -10.866 -4.893 -16.467 14.785KSS 18.341 13.601 19.279 19.646 27.191DDS 2.687 1.506 2.820 3.027 3.145SSI -49.590 -31.428 -33.051 -30.990 -18.518SMRT 13.815 4.700 1567.923 undefined undefinedDebt service margin2002 2003 2004 2005 2006JCP 0.506 0.421 0.521 0.720 0.712KSS 40.784 2.122 75.637 254.530 28.714DDS 3.631 3.113 3.337 4.029 1.817SSI 533.599 1487.495 347.491 815.438 745.473SMRT 0.722 undefined undefined undefined undefined131
Method <strong>of</strong> ComparablesPPS EPS forecast EPS DPS BPS BV EV FCFJCP 81.99 11.3 5.03 0.72 18.99 18.99 19.29KSS 70.27 4.51 3.49 N/A 18.32 25.2DDS 34.62 1.84 2.81 0.16 32.76 3.95SSI 21.02 1.66 1.25 0.12 13.19 0.92SMRT 12.57 0.96 0.86 1.75 6.761 0.54Industry AVG-269.00P/E(trailing)P/E(forward) P/B D/P P.E.G EBITDA P/EBITDA P/FCF EV/EBITDA(inbillions)JCP 16.30 7.26 4.32 0.009 2.72 2.311 3.55 N/A 8.34KSS 20.13 15.58 3.84 N/A 0.93 2.320 3.03 84.82 10.86DDS 12.32 18.82 1.06 0.005 3.1 0.625 5.54 N/A 6.32SSI 16.82 12.66 1.59 0.006 0.84 0.145 14.53 N/A 6.36SMRT 14.62 13.09 1.86 0.139 0.78 0.090 14.02 N/A 6.02Industry AVG 15.97 15.04 2.09 0.05 1.413 0.795 9.47 84.82 7.390Price Comparables Trailing ForwardP/E 80.34 75.64P/B 39.62D/P 14.44PEG 42.55P/EBITDA 21.90EV/EBITDA 72.17P/FCFN/A132
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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
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Qualitative Analysis of DisclosureT
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we can see why targeting the strong
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manipulation diagnostics for J. C.
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Net Sales/Net Accounts ReceivableNe
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Net Sales/Unearned Revenue1200Net S
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Below is a chart of sales manipulat
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As for the industry, all the compan
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Pension Expense/SG&APension Expense
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Below is a chart of all expense man
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discount rates in respect to pensio
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Financial Analysis, Forecast Financ
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paying off their short-term obligat
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ecause many firms in this segment o
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Penney’s inventory turnover is in
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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 102 and 103: ConclusionOverall, it appears that
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 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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