J C Penney Company Inc (NYSE:JCP) is rallying. The JCP stock price has bounced some 31% after hitting an all-time low last month.

Renewed optimism toward retail has helped. So has a third-quarter earnings report that was better than a preliminary earnings release, which sent JCP stock tumbling. Just above $3, JCP still trades at about 20x next year’s consensus EPS estimates — so it might seem like the rally could continue.

But the rally in the JCP stock price seems likely to be short-lived. I argued back in March that JCP was one of seven stocks headed for an all-time low. That’s exactly what happened, and JCP remains on the 2018 list.

After all, I think the overall upward move in retail is nothing more than a “dead cat bounce” as I’ve argued after the rally in Abercrombie & Fitch Co. (NYSE:ANF) and recent strength in Kohl’s Corporation (NYSE:KSS). For JC Penney itself, traffic is declining. Gross margin is falling, in part due to the company’s move into the appliance space. The overall trend here is sharply negative, and there’s little reason to see that changing.

Of course, the simplest reason to argue against the recent move in the JCP stock price is history. JCP has bounced many, many times over the past five-plus years. Each time, the stock has reached a lower low. It’s now declined more than 90% from early 2012 levels. Sadly for JCP shareholders, I don’t expect this time to be any different.

Beware Cheap JCP Stock Price

In February 2012, the JCP stock price was $42. Since then, the overall trend has been negative — but there have been a few bounces along the way. JCP doubled during 2014 from February lows to August highs. Early last year, the JCP stock price went from $6 in January to $11.57 by March. After pulling back, it touched $11 again in August. After dipping, JCP once again cleared double-digits in December. Even this year, there was a 20% rally between June and July.

At a certain point, it’s sheer insanity to “buy the dip” this time, or argue that JCP stock is just “too cheap.” Yes, a ~4-5x price to free cash flow multiple, based on 2017 guidance, looks exceedingly attractive. But that money — all of it — is going to debt-holders, not equity-holders. On any valuation metric, such as EV/EBITDA, that incorporates the $4 billion in debt, not just the ~$1 billion in market capitalization. JCP isn’t cheap, or really all that close.

JCP stock is now trading below book value, which might attract some investors. But book value is not the same as liquidation value. JCP couldn’t get full value for its $3.4 billion of inventory, or its $4.3 billion in property and equipment. It doesn’t have the same real estate value as rival Sears Holdings Corp (NASDAQ:SHLD), whose holdings haven’t arrested the long decline in that stock, either.

JCP stock is not cheap. And it’s certainly not “cheap enough.”

Turnaround Coming For JCP Stock Price?

As such, any bull case for JCP stock has to be based on the idea that results will get better. But how?

Mall traffic continues to decline, as it has for years. JCP same-store sales actually aren’t that bad in that context, coming in flat last year and down 1% through the first three quarters of fiscal 2017 (ending January 2018). Sears’ numbers are much, much worse.

But flat comps mean declining profits, as JCP investors are learning. Even with cost cuts holding down SG&A (selling, general and accounting expenses), gross margin is plunging. The figure is guided to drop another 100-120 basis points this year. Given guidance for flat to negative same-store sales, that suggests that the average store is making about 4% less gross profit this year than it did a year ago.

That’s not tenable. JC Penney can’t cut enough costs to drive overall profit growth with that kind of pressure. Yet its two major initiatives — e-commerce and the move into appliances — both will push gross margins lower. Even an improvement to 3% or 5% same-store sales growth does little if those sales cost more to make.

JCP needs a huge turnaround. And the 1.7% comp growth in Q3, and the 1% decline so far this year, show it’s nowhere close to doing that.

Bottom Line on JCP Stock Price

JC Penney isn’t going bankrupt any time soon — but the equity here still is valued at nearly a billion dollars. That’s on top of over $4 billion in debt, over $1.6 billion of which needs to be repaid before JCP can return a dime to shareholders.

In the best-case scenario, investors have to wait at least five years before the $1.6 billion is repaid. That means that JC Penney has to execute a turnaround. It means an economy in its ninth year of expansion has to grow for another five years, at least. (If you think malls are struggling now, just imagine what they will look like in a recession.)

It has to manage gross margin pressure. It has to keep labor costs down, even though major employers ranging from TJX Companies Inc (NYSE:TJX) to Wal-Mart Stores Inc (NYSE:WMT) to McDonald’s Corporation (NYSE:MCD) all have programs designed to raise wages. Healthcare costs are another issue.

If all of that goes right, investors have to wait five years — again, at least — to get back a dime. If any of those things go wrong, most likely JC Penney goes bankrupt. That’s not likely soon, and not even likely this decade. But it’s likely well before any shareholder sees a return.

That’s the bull case JCP investors are buying — and it’s a thin one at best. That’s been the case for nearly six years now — and, unfortunately, it still is.

As of this writing, Vince Martin has no positions in any securities mentioned.