J.C. Penney (NYSE:JCP) investors are having a “Key Largo” epiphany, just like Johnny Rocco did. “Yeah. That’s it. More. That’s right! I want more!” gangster Rocco (Edward G. Robinson) tells Frank McCloud (Humphrey Bogart) in the film.

After shooting higher on the release of fourth-quarter results last week, JCP shares have more room to advance, we believe. Yeah. That’s it. More.

We’ve been a fan of J.C. Penney for some time, and though our patience has been sorely tried, we simply could not help but think that the strong vein of doubt marbling the investment argument would eventually leach away and that the ore of value would reveal itself.

Convinced that the climactic quarter of fiscal 2015 would do that, we bought the shares last week at $7.50 before the release of fourth quarter results. (See our Feb. 25 instablog post, “J.C. Penney Can’t Rebound? Of Course It Can, Old Sport). We argued three major points:

  • 1. Holiday comp-store sales (up 3.9%) already pointed to a strong quarter.
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  • 2.Given JCP’s strong November-December comps and the wretched performance of competitors like Macy’s, market share gains should have continued apace.
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  • 3.Which made us think that the sales bump, if mixed with the yeast of margin gains, would bake a cake big enough to impress the doubters and rattle the considerable short positions.

    • We won’t trouble you, gentle reader, with a rehash of the fourth quarter (you can easily find it here), but do allow us to complete our victory lap by noting that fourth-quarter comp-store sales finished with a 4.1% gain and that gross margin improved 30 basis points over the year-ago quarter to 34.1%.

    By the end of trading Monday, JCP stock had appreciated 22% in two trading sessions to $10.20 per share. If you got in Wednesday, the gain was 32%. We’re confident there’s more to come as Penney keeps reporting progress toward its goal of $1.2 billion in EBITDA in 2017.

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