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JCP By The Numbers

|Includes: J.C. Penney Company Inc. (JCP), M

Goldman Sachs caused mass panicked selling in JCP when they entered a sell rating with a 12 month price target of $5.50. The price has not been that low since February.

This tells me that Goldman Sachs does not believe that there has been a significant reduction in risk, improvement in cash flow, or change in the overall direction of the business. Lets compare the financial results for FYTD '14 and '15.

Financial performance.
  FYTD '14 FYTD '15
Comp Sales -11% 4.3%
Gross Margin 29.9%


SG&A 38.5% 35.4%
Operating Expense 45.8% 39.6%
Operating Income -15.9% -4.4%
Net Income $-1,423 Million $-712 Million
Adjusted EBITDA $-688 Million $-20 Million

I do not care what anyone says that is a massive turnaround in 1 year. To say that the CEO has not earned a higher valuation is absurd.

Yes, There is still risk involved but given the Q3 results, I think you can reduce the risk adjustment for liquidity concerns. In a soft quarter the company still managed to produce $25 Million in Adjusted EBITDA. The adjusted EBITDA for the year is only negative by $20 million and should easily be positive for the year with the consensus Q4 earnings of $0.07.

I understand that Q3 was week for revenue growth but -.5% was still a decent number considering Macy's (NYSE:M) had revenue that contracted 1.3% in the same quarter. The soft quarter was felt through many companies not just JCP.

While this is happening and the stock is selling around $6.65 the company still has $2,430 Million in equity on 304.8 million shares or a book value of $7.97 per share. To buy the company right now at $6.65 represents nearly a 20% increase in your assets.

I think JCP investors need to take the weekend and think about the valuation of the company before they come out selling on Monday.

Disclosure: The author is long JCP.