Investors in Jo-Ann Stores (NYSE:JAS) can be excused for feeling jerked around like a needle in the midst of a furious cross-stitch. The purveyor of crafting, decorating, and sewing products has had a bumpy ride over the past few years. The stock pricked investors with a 57.2% decline in 2005, which was a tough year for rivals A.C. Moore (NASDAQ:ACMR) and Hancock Fabrics (NYSE:HKF) as well. Then in 2006, the stock doubled after investors realized they'd thrown out a reasonably well-crafted business amidst all of the remnant fabric.

Tuesday's jump in share price was no exception to the stock's recent volatility. The 12.4% move came in response to Monday's after-hours earnings results, which handily exceeded Wall Street estimates for both the past quarter and the fiscal year ahead. Sure, the earnings result was nice, but this is not what drove the stock. Jo-Ann management projected earnings to be approximately double what the three analysts who cover the company had forecasted. That forward guidance is what left investors all googly-eyed.

Jo-Ann Stores has concluded its repair plan, which has certainly done wonders for profitability. More efficient Superstores, which maximize revenue per square foot, are being rolled out, while traditional stores are getting snipped. The company is also guarding its gross margin by avoiding aggressive clearance pricing. Old inventory has been worked off, painfully but surely, and new products are being rolled out to draw more foot traffic to the stores.

Something to keep an eye on is Jo-Ann's debt level. While this has been a point of focus for management, the company is still pretty highly leveraged. This was understandable, given the capital requirements of the significant Superstore rollout, but now that the company has stated that it's dialing back on store openings, I'd like to see more company cash go toward paying down more of that debt.

As far as Jo-Ann's valuation is concerned, things are somewhat complicated because earnings were negative last year. However, using Tuesday's closing price and management's earnings guidance, I calculate a forward P/E in the 40-47 range. Unless Jo-Ann Stores cut a deal with Rumpelstiltskin without informing investors -- a clear violation of Regulation FD, even when fairy-tale characters are involved -- I'm pretty sure the company's affordable sewing machines don't turn thread into gold. In other words, the stock now seems about as affordable as a Swarovski-studded Singer.

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Fool contributor Toby Shute performed stand-up last night and left the audience in stitches. OK, that's just a yarn. But the Fool's disclosure policy is no joke.