1-Star Stocks Poised to Plunge: J.C. Penney?

Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, department store operator J.C. Penney (Nasdaq: JCP ) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at J.C. Penney's business and see what CAPS investors are saying about the stock right now.

J.C. Penney facts

Headquarters (Founded)	Plano, Texas (1902)
Market Cap	$7.3 billion
Industry	Department stores
Trailing-12-Month Revenue	$17.8 billion
Management	Chairman/CEO Myron Ullman III CFO Michael Dastugue
Return on Equity (Average, Past 3 Years)	8.1%
Cash/Debt	$1.8 billion / $3.1 billion
Dividend Yield	2.3%
Competitors	Kohl's (NYSE: KSS ) Macy's (NYSE: M ) Target (NYSE: TGT )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 27% of the 710 members who have rated J.C. Penney believe the stock will underperform the S&P 500 going forward. These bears include fellow Fool Alyce Lomax (TMFLomax) and amassafortune.

This week, Alyce touched on the stock's recent hiring-coup-fueled surge: "Hmm, new president [Ron Johnson] will come from Apple, but it's too late for J.C. Penney."

In fact, J.C. Penney now sports a P/E of 20.5. That represents a premium to competitors like Kohl's (13.3), Macy's (12.1), and Target (11.4).

CAPS All-Star amassafortune also thinks the recent rally is tough to justify:

[T]he billion dollar plus spike in market cap because an Apple guy will move to the company in five months is a bit much. ...

Even with his track record, distinguishing JCP among its large rivals with similar product offerings will be much more difficult than creating hip retail store concepts that highlight the hottest-selling products of the decade. The product margins to support brick and mortar revamps exist with Apple, but not with JCP. Even if conceptually successful, there is likely to be margin erosion for several quarters until increased sales cover the expense of making JCP stores must-visit spaces.

What do you think about J.C. Penney, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days.

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