For several months, analysts have publicly railed against J.C. Penney (NYSE:JCP), a $2.75 billion market capitalization retailer. Over the past few years, shareholders have been negatively affected by the company as a series of poor management decisions culminated in revenue declining by 29.8%. In the past five years, J.C. Penney's net income has gone from $572 million to -$985 million.

In juxtaposition, competitors like Macy's (NYSE:M) and Dillard's (NYSE:DDS) have faired much better. In the past five years, Macy's saw its revenue rise by 11.2%. Over the same time horizon, net income went from -$4.8 billion to $1.34 billion.

Dillard's also faired well over this time horizon, but nowhere near as well as Macy's. In the past five years, revenue declined by 3.4%. Net income, on the other hand, increased from -$241.1 million to $336 million as management was able to reduce its costs significantly.

On top of rapidly declining profitability, shareholders had to withstand the old CEO, Mike Ullman, being ousted and a new CEO, Ron Johnson, take the helm. After 17 months in the post, the board of directors threw Johnson out and reinstated Ullman in a desperate attempt to bring the company back to its former glory.

Silver lining for investors
At first, it appeared as though there was no going back; the damage was done. In the first full quarter after Johnson's forced departure, net income declined 40.6% to -$586 million. Subsequent to this though, some miraculous events began to transpire. In October, the company announced that September sales saw less of a decline than management initially expected. October sales were even better, with the company seeing store sales rise by 1%, the first monthly increase since 2011.

In response to this positive news, hedge funds like Appaloosa Management, a $6.3 billion hedge fund, began taking up small-to-medium-sized stakes in the troubled retailer. In response to these initiated stakes and an early turnaround in the company's sales, J.C. Penney stock appreciated 8.3% within the past week alone.

Kicking the tires
Peter Lynch, the famous (and long since retired) manager of the Fidelity Magellan Fund, was a firm believer in kicking the tires on an investment. What this means is that, before you decide to buy or sell an investment, you should try that company's product or service first. Doing so will tell you a lot about what it is you are buying into and should give some perspective that you can't get from a balance sheet.

On a recent trip to some J.C. Penney stores, I found their stores to be incredibly busy.  However, it is entirely possible that the traffic was only at that location while others may be performing poorly.  To get a better grasp of what business is like, it would be advisable for prospective investors to visit some locations near them and see how well business is doing.

Foolish takeaway
Based on the information provided in this article, it would appear as though J.C. Penney is beginning to turn itself around.  However, the start of a turnaround is oftentimes the most vulnerable as a miscalculation on management's part can undo all the work that has been put into making the business thrive again. 

Additionally, the Foolish investor should take into consideration the fact that J.C. Penney reported earnings this morning that were below Mr. Market's expectations.  At a loss of $1.94 per share on revenue of $2.78 billion, the company fell short of the $1.72 loss per share on revenue of $2.8 billion that was estimated by analysts. 

Although the company reported that comparable store sales rose 0.9% in October, this earnings shortfall should serve as a sign of caution for anyone who thinks the business will do a 180 over night.  Any investment in the enterprise will likely take a while to pay off and will likely be subject to numerous ups and downs.  If, after reviewing the company's financials, you believe that a legitimate turnaround is in the works and if you are comfortable with the risk that comes with it, then I believe J.C. Penney might provide a valid investment opportunity moving forward.

Daniel Jones has no position in any stocks mentioned. The Motley Fool owns shares of Dillard's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.