Sears Holdings Corp (SHLD): This Speculative Retailer May Pay Off in the End

As mentioned, J.C. Penney Company, Inc. (NYSE:JCP) is another company on the rebound, but for some reason their efforts seem to be better received by the market. Yes, the company is projected to have a loss for this year and the next two, but the loss is expected to narrow significantly, and ultimately produce a return to profitability by 2016. I can live with that, because as I’ve said: if a company is losing money now (but won’t be forever) it could be a terrific bargain. J.C. Penney Company, Inc. (NYSE:JCP) might be one of those cases…it is certainly more likely than with Sears.

As far as the numbers go, J.C. Penney produced just under $13 billion in revenue last year, which translates to just $59 in revenue per share, although shares trade for less. A better comparative number may be revenue/market cap, in which case the companies rank:

1. Sears: $6.59 in sales per $1 in market capitalization.
2. J.C. Penney: $3.34
3. Macy’s $1.42

The Bottom Line

For the retailers above, these sales calculations seem inversely proportional to the health of their respective companies. Comparing these figures for companies who sell somewhat similar product varieties can give you a good idea of how the market views the future of each one.

Of course, public opinion of these companies changes rapidly. The figures above are also directly proportional to the potential, should these companies successfully turn things around. With a healthy profit margin, Sears Holdings Corp (NASDAQ:SHLD) could be a $300 stock, easily. They were around $200 per share actually until things started to sour in 2007. However, do NOT throw any money into Sears that you can’t afford to lose. A company that is this far gone is akin to buying a lottery ticket.

That being said, I think that in order to keep things fun, investors should set aside a small amount of their portfolio for speculative stocks. This is definitely one of those!

The article This Speculative Retailer May Pay Off in the End originally appeared on Fool.com and is written by Matthew Frankel.

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