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NEW YORK (TheStreet) -- Investors looking for protection amid a declining market might consider gun maker Smith & Wesson (SWHC) . According to note Friday by Wunderlich Securities analyst Rommel Dionisio, the company's "rapid pace of new product innovation" will allow Smith & Wesson to gain U.S. market share.

The question is, how secure is the gun industry?

With the both the Dow Jones Industrial Average (DJI) and S&P 500 (SPY) - Get S&P 500 ETF TRUST ETF Report down 5.5% and 5.9%, respectively, over the past month (as of 10 a.m. Monday), there are plenty of cheap -- or at least cheaper -- stocks on the market. And many of them don't come with the overhang of gun-control regulation, which has caused Smith & Wesson's sales to plummet recently.

Dionisio has a $13 price target on the stock. That's a 28% premium to Friday's close of $10.14. And Dionisio believes Smith & Wesson will benefit from a growing law-enforcement field and a potential contract with the U.S. military. Dionisio's main point, however, was regarding the risk/reward tradeoff for buying the stock at this level. He said:

"Given the possibility of a turnaround in sales trends for rifles, combined with the stock’s current multiple at an approximate 40% discount to the peer group average on several valuation metrics, we believe shares of SWHC represent a favorable risk/reward tradeoff for patient, value-oriented investors."

To Dionisio's point about how discounted these share are, the stock has fallen 41% since the shares reached a 52-week high of $17.28 on June 11. And even with the company's recent 23% year-over-year revenue decline, it's hard to overlook how cheap these shares have become.

The stock now has a trailing price-to-earnings ratio of seven, which is 11 points lower than the industry average P/E of 18, according to Yahoo! Finance. Consider also that Smith & Wesson's P/E is 12 points below the average trading multiple of companies in the S&P 500, according to CNN Money.

With the stock trading at around its 52-week low, there may not be a better buying opportunity. Smith & Wesson still has a high analyst price target of $19, which suggests a possible premium of 87% if the shares hit that target. And even the median target of $15, which is more realistic, represents a gain of 47% from the current price.

Weaker sales projections suggest a 25% decline, at a range of $100 million and $110 million in sales. Yet Smith & Wesson still runs a highly profitable business.

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The company is posting 40% gross margins, 16 points higher than the industry average of 24%, according to Yahoo! Finance. And its gross margin is five points higher than rival Sturm Ruger (RGR) - Get Sturm Ruger & Company Inc. Report (40% vs. 35%).

While rising inventories remains a legitimate concern for Smith & Wesson, CEO James Debney assured investors that his company was still taking away market share from Ruger and other competitors. And Debney doesn't believe inventory concerns will persist in the second half of the year.

While these shares have shown a history of volatility, this 162-year-old company is not going anywhere. Dionisio believes patient investors should pick up Smith & Wesson at these levels, especially due to its ability to innovate. And waiting for a lower price for a stock that's near its 52-week low is a strategy that could backfire.

At the time of publication, the author held no position in any of the stocks mentioned.

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This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

TheStreet Ratings team rates SMITH & WESSON HOLDING CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate SMITH & WESSON HOLDING CORP (SWHC) a BUY. This is driven by multiple 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 notable return on equity, attractive valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

You can view the full analysis from the report here: SWHC Ratings Report