Intrinsic value of J.C. Penney Company, Inc. Holding Compan - JCP

Previous Close

$1.25

  Intrinsic Value

$2.05

stock screener

  Rating & Target

str. buy

+64%

Previous close

$1.25

 
Intrinsic value

$2.05

 
Up/down potential

+64%

 
Rating

str. buy

We calculate the intrinsic value of JCP stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  12,756
  13,050
  13,385
  13,761
  14,179
  14,636
  15,135
  15,674
  16,256
  16,880
  17,547
  18,259
  19,017
  19,823
  20,678
  21,585
  22,544
  23,558
  24,630
  25,762
  26,956
  28,215
  29,543
  30,941
  32,414
  33,965
  35,597
  37,315
  39,122
  41,023
Variable operating expenses, $m
  12,348
  12,632
  12,957
  13,321
  13,725
  14,168
  14,651
  15,173
  15,736
  16,339
  16,985
  17,675
  18,409
  19,189
  20,017
  20,894
  21,822
  22,804
  23,842
  24,937
  26,093
  27,312
  28,597
  29,951
  31,377
  32,878
  34,458
  36,121
  37,870
  39,710
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  12,348
  12,632
  12,957
  13,321
  13,725
  14,168
  14,651
  15,173
  15,736
  16,339
  16,985
  17,675
  18,409
  19,189
  20,017
  20,894
  21,822
  22,804
  23,842
  24,937
  26,093
  27,312
  28,597
  29,951
  31,377
  32,878
  34,458
  36,121
  37,870
  39,710
Operating income, $m
  408
  418
  428
  440
  454
  468
  484
  502
  520
  540
  562
  584
  609
  634
  662
  691
  721
  754
  788
  824
  863
  903
  945
  990
  1,037
  1,087
  1,139
  1,194
  1,252
  1,313
EBITDA, $m
  989
  1,012
  1,038
  1,067
  1,099
  1,135
  1,173
  1,215
  1,260
  1,308
  1,360
  1,415
  1,474
  1,537
  1,603
  1,673
  1,747
  1,826
  1,909
  1,997
  2,089
  2,187
  2,290
  2,398
  2,513
  2,633
  2,759
  2,892
  3,032
  3,180
Interest expense (income), $m
  0
  305
  315
  327
  340
  356
  373
  391
  412
  434
  457
  483
  510
  539
  570
  602
  637
  674
  713
  754
  798
  844
  893
  944
  998
  1,055
  1,115
  1,178
  1,244
  1,314
  1,388
Earnings before tax, $m
  103
  103
  102
  100
  98
  96
  93
  90
  87
  83
  79
  75
  70
  65
  59
  54
  47
  41
  34
  26
  19
  10
  1
  -8
  -18
  -28
  -39
  -50
  -62
  -75
Tax expense, $m
  28
  28
  27
  27
  26
  26
  25
  24
  23
  22
  21
  20
  19
  17
  16
  14
  13
  11
  9
  7
  5
  3
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  76
  75
  74
  73
  72
  70
  68
  66
  63
  61
  58
  54
  51
  47
  43
  39
  35
  30
  25
  19
  14
  7
  1
  -8
  -18
  -28
  -39
  -50
  -62
  -75

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  8,625
  8,823
  9,050
  9,305
  9,587
  9,896
  10,233
  10,598
  10,991
  11,413
  11,864
  12,346
  12,858
  13,403
  13,981
  14,594
  15,243
  15,928
  16,653
  17,418
  18,226
  19,077
  19,975
  20,920
  21,916
  22,965
  24,069
  25,230
  26,452
  27,737
Adjusted assets (=assets-cash), $m
  8,625
  8,823
  9,050
  9,305
  9,587
  9,896
  10,233
  10,598
  10,991
  11,413
  11,864
  12,346
  12,858
  13,403
  13,981
  14,594
  15,243
  15,928
  16,653
  17,418
  18,226
  19,077
  19,975
  20,920
  21,916
  22,965
  24,069
  25,230
  26,452
  27,737
Revenue / Adjusted assets
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
  1.479
Average production assets, $m
  4,528
  4,633
  4,752
  4,885
  5,033
  5,196
  5,373
  5,564
  5,771
  5,992
  6,229
  6,482
  6,751
  7,037
  7,341
  7,663
  8,003
  8,363
  8,744
  9,145
  9,569
  10,016
  10,488
  10,984
  11,507
  12,058
  12,637
  13,247
  13,888
  14,563
Working capital, $m
  880
  900
  924
  950
  978
  1,010
  1,044
  1,082
  1,122
  1,165
  1,211
  1,260
  1,312
  1,368
  1,427
  1,489
  1,556
  1,626
  1,699
  1,778
  1,860
  1,947
  2,038
  2,135
  2,237
  2,344
  2,456
  2,575
  2,699
  2,831
Total debt, $m
  4,371
  4,537
  4,727
  4,940
  5,175
  5,434
  5,716
  6,021
  6,349
  6,702
  7,079
  7,482
  7,911
  8,366
  8,849
  9,362
  9,904
  10,477
  11,083
  11,723
  12,398
  13,109
  13,860
  14,650
  15,483
  16,360
  17,282
  18,253
  19,275
  20,349
Total liabilities, $m
  7,210
  7,376
  7,566
  7,779
  8,014
  8,273
  8,555
  8,860
  9,188
  9,541
  9,918
  10,321
  10,750
  11,205
  11,688
  12,201
  12,743
  13,316
  13,922
  14,562
  15,237
  15,948
  16,699
  17,489
  18,322
  19,199
  20,121
  21,092
  22,114
  23,188
Total equity, $m
  1,414
  1,447
  1,484
  1,526
  1,572
  1,623
  1,678
  1,738
  1,803
  1,872
  1,946
  2,025
  2,109
  2,198
  2,293
  2,393
  2,500
  2,612
  2,731
  2,857
  2,989
  3,129
  3,276
  3,431
  3,594
  3,766
  3,947
  4,138
  4,338
  4,549
Total liabilities and equity, $m
  8,624
  8,823
  9,050
  9,305
  9,586
  9,896
  10,233
  10,598
  10,991
  11,413
  11,864
  12,346
  12,859
  13,403
  13,981
  14,594
  15,243
  15,928
  16,653
  17,419
  18,226
  19,077
  19,975
  20,920
  21,916
  22,965
  24,068
  25,230
  26,452
  27,737
Debt-to-equity ratio
  3.090
  3.140
  3.180
  3.240
  3.290
  3.350
  3.410
  3.460
  3.520
  3.580
  3.640
  3.700
  3.750
  3.810
  3.860
  3.910
  3.960
  4.010
  4.060
  4.100
  4.150
  4.190
  4.230
  4.270
  4.310
  4.340
  4.380
  4.410
  4.440
  4.470
Adjusted equity ratio
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  76
  75
  74
  73
  72
  70
  68
  66
  63
  61
  58
  54
  51
  47
  43
  39
  35
  30
  25
  19
  14
  7
  1
  -8
  -18
  -28
  -39
  -50
  -62
  -75
Depreciation, amort., depletion, $m
  581
  594
  609
  626
  645
  666
  689
  713
  740
  768
  799
  831
  866
  902
  941
  982
  1,026
  1,072
  1,121
  1,172
  1,227
  1,284
  1,345
  1,408
  1,475
  1,546
  1,620
  1,698
  1,781
  1,867
Funds from operations, $m
  656
  669
  683
  699
  717
  736
  757
  779
  803
  829
  856
  885
  917
  950
  984
  1,021
  1,061
  1,102
  1,146
  1,192
  1,240
  1,292
  1,346
  1,400
  1,458
  1,518
  1,581
  1,648
  1,718
  1,792
Change in working capital, $m
  17
  20
  23
  26
  29
  32
  34
  37
  40
  43
  46
  49
  52
  56
  59
  63
  66
  70
  74
  78
  82
  87
  92
  97
  102
  107
  113
  119
  125
  131
Cash from operations, $m
  639
  649
  660
  673
  688
  704
  722
  742
  763
  786
  810
  836
  864
  894
  925
  959
  994
  1,032
  1,072
  1,114
  1,158
  1,205
  1,254
  1,304
  1,356
  1,411
  1,469
  1,530
  1,594
  1,661
Maintenance CAPEX, $m
  -569
  -581
  -594
  -609
  -626
  -645
  -666
  -689
  -713
  -740
  -768
  -799
  -831
  -866
  -902
  -941
  -982
  -1,026
  -1,072
  -1,121
  -1,172
  -1,227
  -1,284
  -1,345
  -1,408
  -1,475
  -1,546
  -1,620
  -1,698
  -1,781
New CAPEX, $m
  -88
  -104
  -119
  -134
  -148
  -163
  -177
  -192
  -206
  -221
  -237
  -253
  -269
  -286
  -304
  -322
  -341
  -360
  -380
  -402
  -424
  -447
  -471
  -496
  -523
  -551
  -580
  -610
  -642
  -675
Cash from investing activities, $m
  -657
  -685
  -713
  -743
  -774
  -808
  -843
  -881
  -919
  -961
  -1,005
  -1,052
  -1,100
  -1,152
  -1,206
  -1,263
  -1,323
  -1,386
  -1,452
  -1,523
  -1,596
  -1,674
  -1,755
  -1,841
  -1,931
  -2,026
  -2,126
  -2,230
  -2,340
  -2,456
Free cash flow, $m
  -19
  -36
  -53
  -69
  -86
  -103
  -121
  -138
  -157
  -176
  -195
  -215
  -236
  -258
  -280
  -304
  -328
  -354
  -381
  -409
  -438
  -469
  -501
  -537
  -575
  -615
  -657
  -700
  -746
  -794
Issuance/(repayment) of debt, $m
  139
  166
  190
  213
  236
  259
  282
  305
  329
  353
  377
  403
  429
  456
  483
  512
  542
  573
  606
  640
  675
  712
  750
  791
  833
  877
  923
  971
  1,021
  1,074
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  1
  9
  16
  25
  33
  42
  51
  61
  72
  83
  94
  106
  119
  132
  146
  163
  181
  200
  220
  241
  263
  286
Cash from financing (excl. dividends), $m  
  139
  166
  190
  213
  236
  259
  282
  305
  330
  362
  393
  428
  462
  498
  534
  573
  614
  656
  700
  746
  794
  844
  896
  954
  1,014
  1,077
  1,143
  1,212
  1,284
  1,360
Total cash flow (excl. dividends), $m
  121
  130
  137
  143
  150
  155
  161
  166
  173
  186
  199
  212
  226
  240
  255
  270
  286
  302
  319
  337
  355
  375
  395
  416
  438
  462
  486
  511
  538
  566
Retained Cash Flow (-), $m
  -31
  -33
  -37
  -42
  -46
  -51
  -55
  -60
  -64
  -69
  -74
  -79
  -84
  -89
  -95
  -100
  -106
  -112
  -119
  -125
  -132
  -140
  -147
  -163
  -181
  -200
  -220
  -241
  -263
  -286
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  89
  97
  100
  102
  103
  105
  106
  107
  109
  117
  125
  133
  142
  151
  160
  169
  179
  189
  200
  211
  223
  235
  248
  253
  258
  262
  266
  271
  275
  280
Discount rate, %
  10.10
  10.61
  11.14
  11.69
  12.28
  12.89
  13.53
  14.21
  14.92
  15.67
  16.45
  17.27
  18.14
  19.05
  20.00
  21.00
  22.05
  23.15
  24.31
  25.52
  26.80
  28.14
  29.55
  31.02
  32.57
  34.20
  35.91
  37.71
  39.59
  41.57
PV of cash for distribution, $m
  81
  80
  73
  65
  58
  51
  43
  37
  31
  27
  23
  20
  16
  13
  10
  8
  6
  4
  3
  2
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  99.9
  99.2
  98.0
  96.3
  94.1
  91.5
  88.5
  85.2
  81.7
  78.1
  74.2
  70.3
  66.4
  62.4
  58.5
  54.6
  50.8
  47.1
  43.5
  40.0
  36.6
  33.5

J. C. Penney Company, Inc. is a holding company. The Company's business consists of selling merchandise and services to consumers through its department stores and its Website at jcpenney.com. Its department stores and Website generally serve the same type of customers, its Website offers virtually the same mix of merchandise as its store assortment and other categories, and its department stores generally accept returns from sales made in stores and through its Website. It fulfills online customer purchases by direct shipment to the customer from its distribution facilities and stores or from its suppliers' warehouses and by in store customer pick up. The Company sells family apparel and footwear, accessories, fine and fashion jewelry, beauty products through Sephora inside JCPenney, home furnishings and appliances. In addition, its department stores provide its customers with services, such as styling salon, optical, portrait photography and custom decorating.

FINANCIAL RATIOS  of  J.C. Penney Company, Inc. Holding Compan (JCP)

Valuation Ratios
P/E Ratio 385.4
Price to Sales 0
Price to Book 0.3
Price to Tangible Book
Price to Cash Flow 1.2
Price to Free Cash Flow -4.1
Growth Rates
Sales Growth Rate -0.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.4%
Cap. Spend. - 3 Yr. Gr. Rate -14.8%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 336.6%
Total Debt to Equity 357.2%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -3.9%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. -5.6%
Return On Equity 0.1%
Return On Equity - 3 Yr. Avg. -20.1%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 35.7%
Gross Margin - 3 Yr. Avg. 35.5%
EBITDA Margin 4.9%
EBITDA Margin - 3 Yr. Avg. 1.7%
Operating Margin 2.9%
Oper. Margin - 3 Yr. Avg. -0.1%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. -3.2%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. -3.3%
Effective Tax Rate 50%
Eff/ Tax Rate - 3 Yr. Avg. 15%
Payout Ratio 0%

JCP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the JCP stock intrinsic value calculation we used $12506 million for the last fiscal year's total revenue generated by J.C. Penney Company, Inc. Holding Compan. The default revenue input number comes from 0001 income statement of J.C. Penney Company, Inc. Holding Compan. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our JCP stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 10.1%, whose default value for JCP is calculated based on our internal credit rating of J.C. Penney Company, Inc. Holding Compan, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of J.C. Penney Company, Inc. Holding Compan.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of JCP stock the variable cost ratio is equal to 96.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for JCP stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 7.2% for J.C. Penney Company, Inc. Holding Compan.

Corporate tax rate of 27% is the nominal tax rate for J.C. Penney Company, Inc. Holding Compan. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the JCP stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for JCP are equal to 35.5%.

Life of production assets of 7.8 years is the average useful life of capital assets used in J.C. Penney Company, Inc. Holding Compan operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for JCP is equal to 6.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1383 million for J.C. Penney Company, Inc. Holding Compan - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 315.400 million for J.C. Penney Company, Inc. Holding Compan is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of J.C. Penney Company, Inc. Holding Compan at the current share price and the inputted number of shares is $0.4 billion.

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