NEW YORK (TheStreet) -- Shares of Sturm, Ruger & Co. (RGR - Get Report) are rising by 7.20% to $65.81 on Tuesday morning, as investors predict that President Barack Obama's new proposed gun restrictions will boost firearm sales.
The Southport, CT-based company designs, manufactures and sells firearms in the US.
"As the firearms industry has seen numerous times before, the threat of gun control legislation again appears to be driving near-term retail sales acceleration, as consumers rush to dealers to purchase firearms they believe may one day become unavailable," Rommel Dionisio, an analyst at Wunderlich Securities told MarketWatch.
Demand for firearms increased in December on speculation of gun control restrictions after attacks in Paris and California, Bloomberg reported.
The president's new gun control measures will increase background checks at gun shows and online by changing the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives' relevant indicators for license requirements from location to quantity and frequency of sales, MarketWatch noted.
The FBI will also hire more than 230 extra examiners to process gun background checks, increasing the number of inspectors by 50%, MarketWatch added.
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 STURM RUGER & CO INC as a Hold with a ratings score of C. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and increase in net income. However, as a counter to these strengths, we also find weaknesses including premium valuation and disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 3.6%. Since the same quarter one year prior, revenues rose by 22.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 1.61, which demonstrates the ability of the company to cover short-term liquidity needs.
- STURM RUGER & CO INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, STURM RUGER & CO INC reported lower earnings of $1.91 versus $5.60 in the prior year. This year, the market expects an improvement in earnings ($2.92 versus $1.91).
- 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. Compared to other companies in the Leisure Equipment & Products industry and the overall market on the basis of return on equity, STURM RUGER & CO INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full analysis from the report here: RGR