With shares of J.C. Penney Company (OTC:JCPN.Q) trading 74% below their 52-week high of $23.10, the Foolish investor is probably wondering if now might be a great time to buy.  Right now, an investment in the retailer is not without risk, but if the business can turn around, the rewards could be rich. 

J.C. Penney has been hit hard lately
Mike Ullman, J.C. Penney's former CEO, retired in 2011. The company brought on Ron Johnson, a now-former executive from Apple, to be his replacement. Immediately, Johnson set about transforming the retailer so that it could, in his mind, be in a prime position to tackle its competitors moving forward.

As part of Johnson's initiative, the company discontinued its use of coupon-based advertising and, instead, focused on providing everyday low prices. Instead of increasing sales though, this move served to disenfranchise its customer base and send business elsewhere, such as Macy's (NYSE:M) and Dillard's (NYSE:DDS). After revenue declined 25% between 2011 and 2012, the board of directors ousted Johnson and reinstated Ullman.

Even after Ullman resumed control of the helm, revenue continued to decline but a ray of hope has appeared. Because of Ullman's decision to begin offering coupons again and, possibly, due to the implementation of Johnson's store-within-a-store concept, comparable-store sales have started to improve. J.C. Penney announced that in October of last year, comparable-store sales rose 0.9% from the same month a year earlier. In November, the comparable-store sales increase hit 10.1%.

Is now a good time to buy J.C. Penney?
Despite the problems that persist at the retailer, some shareholders might ask if this is a prime opportunity to jump into the shares. On top of improving sales metrics, there is something that may prove particularly appealing about the company right now; its book value.

As of its most recent quarter, J.C. Penney's book value sat at $8.69 per share. In other words, if the company's book value does not change by the next quarter, and if book value would equate to market value should the business shut down and liquidate, investors are grabbing a piece of the business for 69% of what it's worth. Even better, if Ullman can bring the store back to profitability, the returns could be phenomenal.

Take, for example, the case of Dillard's. In its most recent quarterly report, Dillard's had a book value (including adding back its Treasury stock) of $88.05 per share. At the company's current market price of $88.73, this would imply that J.C. Penney, if restored to the kind of profitability seen by Dillard's, would be worth $8.76.

Macy's is an even more extreme example. A book value of $14.77 and a share price of $52.82 would value a restored J.C. Penney at $31.08 per share. However, just as with the Dillard's example, to receive this valuation J.C. Penney would not just have to recover, it would have to thrive and produce the kind of performance that Macy's has shown in recent years.

Foolish takeaway
Unfortunately, it's unknown whether J.C. Penney will survive its current predicament, but early results from late last year indicate that the retailer may be on its way to better times. If so, the upside for shareholders could be significant. On the other hand, should operations continue to deteriorate, the Foolish investor who decides to buy J.C. Penney's shares may be cushioned against too far of a drop because of the business's book value.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.