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

industry. Unfavorable numbers present in the debt to equity ratio as well astimes interest earned ratio compared to industry averages; although, fluctuationis higher in at least one other company in both aspects. Because of thesereasons, the company does not raise any red flags, but it also shows that theJ. C. Penney is not an industry leader in respect to the ability to pay debts withshareholder’s equity. This is found to be caused by the investments inrestructuring after the sales of Eckerd Pharmacy and Rojas Renner S. A. as wellas the push of new brands and labels by the company.IGR/SGR AnalysisDetermining a firm’s estimated growth rates helps paint a picture ofwhether or not they will continue to be profitable in the future. The growth rateof a firm is dependent upon a number of factors including their returns on assetsand equity, as well as their dividend payout and debt to equity ratios.Internal Growth RateA firm’s internal growth rate (IGR) determines how much a company cangrow their asset base that can be sustained all with internal financing. Thismeans that the firm is trying to increase their assets without financing them withdebt. They are trying to finance future projects completely with funds generatedfrom the firms operations and not borrow any excessive amounts of funding frombanks or any kind of financial institutions. J. C. Penney has a relatively small IGRcompared to firms such as Kohl’s and Stage Stores, Inc. They are obviouslyfunding more of their future projects with borrowed versus internally generatedfunding than these competitors. However, their IGR is higher than that ofDillard’s, so they are funding less of their future projects with debt and morewith internal funds. J. C. Penney’s IGR is pretty consistent with that of SteinMart. They both are keeping a steady balance between funding with debt andinternal financing.88