NEW YORK (TheStreet) -- Shares of Sturm, Ruger & Co. (RGR - Get Report) are dropping by 2.3% to $64.03 on Wednesday morning, as an analyst questioned whether the rise in gun sales will last in the wake of recent terrorist attacks and President Barack Obama's executive action on gun control yesterday, MarketWatch reports.
Sturm Ruger is a Southport, CT-based company that designs, manufactures and sells firearms in the U.S.
The gun maker's stock has surged over the past two days. When the government tries to tighten gun legislation, near-term sales of firearms tend to increase, Rommel Dionisio, an analyst at Wunderlich Securities told Bloomberg on Monday.
Additionally, Wedbush Securities downgraded fellow gun maker Smith & Wesson (SWHC) to "neutral" from "outperform" on Tuesday, after the stock rallied and was up almost 160% over the last year, MarketWatch reports. The firm also raised concerns about whether surging gun sales will last.
While gun industry sales are "clearly in 'surge' mode," it's uncertain if the sales are just from "pulled-forward demand," because there have been historical instances of both, Wedbush said in a note, according to MarketWatch.
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