NEW YORK (TheStreet) -- Shares of Sturm, Ruger & Company
(RGR - Get Report) are slipping -3.96% to $49.01 in early market trade as the firearms company was downgraded to "fair value" from "buy" at CRT Capital today.
The firm lowered its price target to $55 from $80.
Analysts at the firm said high distributor inventory levels will pressure revenues and earnings through the end of the year.
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"We rate STURM RUGER & CO INC (RGR) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income." Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RGR has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, RGR has a quick ratio of 1.51, which demonstrates the ability of the company to cover short-term liquidity needs.
- 38.59% is the gross profit margin for STURM RUGER & CO INC which we consider to be strong. Regardless of RGR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RGR's net profit margin of 14.50% compares favorably to the industry average.
- RGR, with its decline in revenue, underperformed when compared the industry average of 6.3%. Since the same quarter one year prior, revenues fell by 14.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Leisure Equipment & Products industry and the overall market, STURM RUGER & CO INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- You can view the full analysis from the report here: RGR Ratings Report