J.C. Penney (NYSE:JCP) is set to report its fiscal 2014 first-quarter earnings after the market closes on Thursday. Investors are hoping for a strong quarter to help fuel a comeback in the retail stock -- the share price has fallen more than 49% in the past year. Let's look at Wall Street's estimates for the quarter and whether J.C. Penney could overdeliver on those projections.

Expecting better
Wall Street expects J.C. Penney to post a loss of $1.25 per share in the first quarter. That would be a $0.13 improvement over the same period a year ago, in which the department store chain reported a profit loss of $1.38 per share. However, it would mark the company's ninth consecutive quarterly loss to date. The Street is more optimistic about J.C. Penney's ability to grow revenue in the quarter. Analysts are looking for revenue of $2.71 billion in Q1, up from $2.6 billion in the year-ago period.

These forecasts are comforting in theory. But if history is any indication, it could be a tough ride for J.C. Penney shareholders. That's because the retailer has fallen short of expectations in three of the last four quarters. In fact, for the first quarter of fiscal 2013 the company's loss was 55% worse than analysts had expected. The question now is whether history will repeat itself.

Unfortunately, for J.C. Penney shareholders, the stock's disappointing past performance isn't its only serious weakness heading into earnings. The discount retail chain is also plagued by poor profitability.

More money, less problems
Return on equity is a good measure of a company's profitability because it shows how much profit the company returns to shareholders with the money those shareholders have invested. Therefore, J.C. Penney's ROE of negative 44.36% tells us the company is more of a cash consumer than an asset creator.

For comparison, rival department store chain Macy's (NYSE:M) ROE is 25% today. This means that Macy's creates $0.25 of profits for every dollar originally invested. Therefore, unlike J.C. Penney, Macy's is an asset creator and thus able to generate shareholder value. J.C. Penney's ROE is considerably below that of Macy's and other rivals, as well as the S&P 500.

Despite these challenges, the stock looks cheap today with a price-to-sales ratio of 0.22, which is below the Multiline Retail industry P/S ratio of 0.4. Shares of J.C. Penney currently trade around $9.15 apiece. However, an affordable share price only makes it a favorable stock pick if you believe the retailer can turn the business around. I don't see that happening in the near term. Severe winter weather likely had a negative impact on the company's first quarter as fewer people hit the malls. Not to mention, J.C. Penney is still trying to win back customers that it lost after failing to reinvent itself in 2012. Therefore, if J.C. Penney shocks investors when it reports its quarterly results on Thursday, it will likely be a surprise to the downside.

Tamara Rutter has no position in any stocks mentioned, and neither does The Motley Fool. 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.