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NEW YORK (TheStreet) -- Smith & Wesson (SWHC) stock is declining by 2.32% to $25.26 in pre-market trading on Wednesday, following a rating downgrade to "neutral" from "outperform" at Wedbush today.

The firm has a $26 price target on the stock.

Shares of the firearm manufacturer soared by roughly 11% in Tuesday's trading session on a push for stricter gun regulations and upwardly revised guidance. Gun owners worry that President Obama's executive action to expand background checks for firearm sales and otherwise tighten gun control measures will lead to even more severe restrictions, which is boosting short-term demand for the weapons.

Although gun industry sales are "clearly in 'surge' mode," it's unclear whether the sales are just from "pulled-forward demand," as there have been historical examples of both, Wedbush said in a note, MarketWatch reports.

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The firm is downgrading the stock given Smith & Wesson's strong valuation and stock surge of more than 150% in a year.

Separately, recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate SMITH & WESSON HOLDING CORP as a Buy with a ratings score of B. This is driven by a number of strengths, 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 revenue growth, solid stock price performance, increase in net income, good cash flow from operations and expanding profit margins. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 3.6%. Since the same quarter one year prior, revenues rose by 32.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 144.44% and other important driving factors, this stock has surged by 127.31% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, SWHC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Leisure Equipment & Products industry. The net income increased by 146.8% when compared to the same quarter one year prior, rising from $5.05 million to $12.47 million.
  • Net operating cash flow has significantly increased by 143.18% to $6.14 million when compared to the same quarter last year. In addition, SMITH & WESSON HOLDING CORP has also vastly surpassed the industry average cash flow growth rate of 13.89%.
  • 46.25% is the gross profit margin for SMITH & WESSON HOLDING CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 8.70% trails the industry average.
  • You can view the full analysis from the report here: SWHC