Through The Fly's Eyes: Jo-Ann Stores

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.














Is This Firm On The Block? Maybe Sew...

As more people take up sewing for recreation, the fabric store is becoming an arts and crafts center. A Hudson, Ohio company has been on the cutting edge of the transformation.

Jo-Ann Stores Inc. (JAS) is the nation's leading fabric retailer, offering a range of merchandise used in sewing, crafting and home decorating projects. Among its staple items are fabrics, notions, frames, paper crafting materials, artificial and dried flowers, home accents and finished seasonal goods. The company operates more than 940 stores, in 47 states.

Jo-Ann Stores made the news last week, on word it is the subject of serious acquisition interest. According to TheDeal.com, the firm would probably be taken private at a premium to its current share price. Bids were said to be due this month. Parties described as being involved declined comment.

Still, the stock popped above 30-day moving average support on the story and is now consolidating the gain in a bullish "pennant" pattern. Stocks frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with two "holds" and a "sell". Analysts see a 75% growth rate, through the next year. The stock's Price to Sales ratio (0.44), Price to Book ratio (1.91), Price to Free Cash Flow ratio (17.13) and EPS Growth rate (-0.24 to -0.07 yr/yr) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $12.14 and $34.75. A stop-loss of $28.50 looks good here. Note that the firm reported in-line Q1 results and offered in-line FY08 EPS guidance last Wednesday.