Wednesday, August 26, 2009

Jo-Ann Stores Update

Jo-Ann Stores (JAS) reported after the market closed today.

With roughly 26 million shares outstanding and a $25.80 share price, JAS has a market value of $670 million. The updated balance sheet shows $80.2 million in cash (12% of market value) and debt of $50.5 million. In addition to a net cash position, Jo-Ann announced an increase in GAAP earnings expectations to a range of $1.35 to $1.50 a share for the year. That works out to 19.1 times earnings at the low end. Not all that cheap.

The good news is that capital expenditures are expected to be $30 to $32 million (well below depreciation expense), which leads to a free cash flow estimate of $70 to $74 million. So the free cash flow multiple is between 9 and 9.6. Much better.

Jo-Ann Stores is up 40% since my initial purchase in May. Obviously, the company isn't as cheap as it was, but at current levels, it isn't expensive either.

The transformation of the company and the trends discussed elsewhere on this site continue.

Stock was up over 3% today and is up another 7+% in after-hours trading to $27.50 or so.

"I love it when a plan comes together!"

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