Sturm, Ruger & Company, Inc.
(
RGR
) had so much business that it had to stop taking new gun orders
for about two months earlier this year. If business is so great,
then why are shares of this Zacks #2 Rank (Buy) in a free fall?
Sturm, Ruger makes firearms for the commercial sporting market.
Headquartered in Connecticut, it manufactures in both New Hampshire
and Arizona.
Taking New Orders Again
On Mar 21, 2012, Sturm Ruger announced that it had a million order
backlog and that it was temporarily suspending acceptance of new
orders.
It is basically unheard of for a manufacturer, of any product, to
simply say it wasn't going to take any more orders because it was
overwhelmed.
On May 29, the company lifted that suspension and was again
accepting orders from its independent wholesale distributors.
Sturm Ruger said demand for its products was "very strong" and that
the current backlog, even with the 2 month suspension, remained
significantly above the prior years levels.
Another Earnings Beat in Q1
On May 1, Sturm Ruger reported first quarter results and blew by
the Zacks Consensus Estimate for the 10th quarter in a row.
It beat by 16% with earnings of 79 cents compared to just 42 cents
in the year ago quarter.
Sales soared 33% to $112.3 million from $75.4 million in the first
quarter of 2011. New product introductions represented 37% of sales
in the first quarter.
No Debt
As of Mar 31, 2012, the company had cash, cash equivalents and
short-term investments totaling $95.8 million. Even more
impressively, it has no debt.
With the impressive balance sheet, the company has been rewarding
shareholders. Sturm Ruger now pays a dividend yielding a very
attractive 3.5%.
Valuations Still Solid
Shares soared in 2012 as sales took off on fears that President
Obama would win a second term and then, being a lame duck, try and
restrict gun ownership.
Then, just as suddenly, investors dumped the stock.
The recent sell-off has created an opportunity for value investors
which wasn't there before as the stock soared.
Sturm Ruger is now trading with a forward P/E of 12.9, which is
under the 15x level I use for value stocks.
Its price-to-book ratio of 4.9 is a little higher than I normally
look for as a P/B ratio under 3.0 usually indicates value.
But it has other solid fundamentals including a 1-year return on
equity (ROE) of 34.4% which blows away the average of the S&P
500 of just 13.1%.
Zacks Consensus Estimate Rises for 2012
Analysts are sticking with their full year estimates. In the last
60 days the 2012 Zacks Consensus Estimate has risen to $2.98 from
$2.70 per share.
That is earnings growth of 42% as the company made only $2.09 last
year.
Sturm Ruger is operating on all cylinders. Value investors have
been given a second chance to jump on board.
This Week's Value Zacks Rank Buy Stocks
Saia Inc.
(
SAIA
), a regional trucker, is a triple threat. This Zacks #1 Rank
(Strong Buy) is a value stock with a forward P/E of 13.7, is
expected to see triple digit earnings growth in 2012 and has
momentum as shares are at a 2-year high.
Read the full article.
Local television stations are loving Decision 2012 as political
advertising revenue has sharply increased.
Gray Television, Inc.
(
GTN
) has turned it around from an earnings loss in 2011 to being
profitable in 2012. This Zacks #1 Rank (Strong Buy) remains
extremely cheap, with a forward P/E of just 2.3.
Read the full article.
How much more of a run does
Foot Locker, Inc.
(
FL
) have? Shares of this Zacks #1 Rank (Strong Buy) are near 5-year
highs. Yet there's still plenty of value as the company trades with
a forward P/E of just 12.6.
Read the full article.
The oil services companies still have mojo.
Oil States International, Inc.
(
OIS
) had a record first quarter as drilling demand remained hot. Yet
skittish investors have sold off shares, making this company a true
value stock with a forward P/E of just 8.7.
Read the full article.
Tracey Ryniec is the Value Stock Strategist for
Zacks.com
. She is also the Editor of the Turnaround Trader and Insider
Trader services. You can follow her on twitter at
@TraceyRyniec
.
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