June 26, 2012

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A Penny Not Saved but Earned?

JCPenney (JCP,$JCP) Short Pick Earns 13% for ValuEngine Forecast 16 Newsletter JCPenney is one of America's leading retailers, operating department stores throughout the United States and Puerto Rico, as well as one of the largest apparel and home furnishing sites on the Internet, jcp.com, and the nation's largest general merchandise catalog business. Through these integrated channels, JCPenney offers a wide array of national, private and exclusive brands. The Company operates 1,102 department stores in 49 states and Puerto Rico as of January 28, 2012. Its business consists of selling merchandise and services to consumers through its department stores and through its Internet Website at jcp.com. It sells family apparel and footwear, accessories, fine and fashion jewelry, beauty products through Sephora inside jcpenney and home furnishings. J. C. Penney Company was the primary short pick from the Retail-Wholesale Sector for this month's edition of the ValuEngine Forecast 16 Market Neutral Newsletter. When selected for our newsletter on Monday, the stock was trading at $24.89/share. The stock closed yesterday at $21.71/share. That's a short gain of almost 13% in one week. The stock has been battered after the unexpected resignation of CEO Michael Francis. Francis had only been on the job eight months, and during his tenure the stock lost more than 20% in value. Sharp drops in share price have triggered SEC short-sale restrictions for the company.

ValuEngine has issued a HOLD recommendation for PENNEY (JC) INC on Jun. 26, 2012. Based on the information we have gathered and our resulting research, we feel that PENNEY (JC) INC has the probability to ROUGHLY MATCH average market performance for the next year. The company exhibits ATTRACTIVE expected EPS growth and market valuation, but UNATTRACTIVE risk and momentum. Based on available data as of Jun. 26, 2012, we believe that JCP should be trading at $41.69. This makes JCP 47.93% undervalued. Fair Value indicates what we believe the stock should be trading at today if the stock market were perfectly efficient and everything traded at its true worth. For JCP, we base this on actual earnings per share (EPS) for the previous four quarters of $0.15, forecasted EPS for the next four quarters of $1.83, and correlations to the 30- year Treasury bond yield of 2.68%.

ValuEngine Forecast
Target Price Expected Return -1.27% -2.00% -4.18% -4.93% -3.48% -9.86%

1-Month 3-Month 6-Month 1-Year 2-Year 3-Year

21.43 21.28 20.8 20.64 20.95 19.57

Valuation & Rankings

Valuation 1-M Forecast Return 12-M Return Sharpe Ratio 5-Y Avg Annual Return Volatility Expected EPS Growth Market Cap (billions) Trailing P/E Ratio Forward P/E Ratio PEG Ratio Price/Sales Market/Book Beta Alpha 47.93% undervalued -1.27% -35.02% -0.46 -24.08% 52.23% 900.00% 4.74 149.57 11.89 0.13 0.29 1.2 1.84 -0.42 Valuation Rank 1-M Forecast Return Rank Momentum Rank Sharpe Ratio Rank 5-Y Avg Annual Rtn Rank Volatility Rank EPS Growth Rank Size Rank Trailing P/E Rank Forward P/E Ratio Rank PEG Ratio Rank Price/Sales Rank Market/Book Rank Beta Rank Alpha Rank 89 15 26 25 28 47 99 89 28 55 95 83 60 20 25

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Market Overview
Summary of VE Stock Universe
Stocks Undervalued Stocks Overvalued Stocks Undervalued by 20% Stocks Overvalued by 20% 73.84% 26.16% 38.48% 10.30%

Sector
Aerospace Auto-Tires-Trucks Basic Materials Business Services Computer and Technology Construction Consumer Discretionary Consumer Staples Finance Industrial Products Medical Multi-Sector Conglomerates Oils-Energy Retail-Wholesale Transportation Utilities

Change
-0.47% -2.61% -1.04% -1.36% -1.70% -1.62% -1.19% -0.70% -1.18% -1.79% -0.84% -1.38% -2.56% -1.13% -2.23% -1.08%

MTD
-0.99% -2.64% 0.28% -0.60% -0.51% -0.05% -1.29% -0.16% 0.72% -2.28% 3.32% -1.25% -3.33% -0.96% -1.18% 2.20%

YTD
-2.84% -2.00% -6.69% 2.77% 3.51% 12.41% 6.17% 5.97% 10.86% -3.28% 9.75% 2.34% -14.27% 5.89% 3.21% -3.23%

Valuation
2.73% undervalued 20.11% undervalued 17.14% undervalued 6.46% undervalued 1.42% overvalued 11.73% undervalued 5.09% undervalued 7.22% overvalued 3.52% overvalued 2.22% undervalued 6.07% overvalued 3.78% undervalued 19.22% undervalued 0.45% overvalued 7.27% undervalued 6.68% overvalued

Last 12-M Return

-14.08% -20.01% -33.18% -5.52% -12.44% -9.15% -5.38% -6.29% -0.82% -14.94% -11.54% -10.64% -28.84% 0.60% -17.43% -7.08%

P/E Ratio
36.9 17.77 21.88 32.67 37.02 41.97 29.75 18.38 21.81 18.77 29.17 13.66 24.16 24.89 23.83 18.85