Is this Gun Stock a Buy? | Summary and Q&A

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January 24, 2017
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Financial Education
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Is this Gun Stock a Buy?

TL;DR

This video analyzes Smith & Wesson (now American Outdoor Brands) stock, discussing their focus on expanding their accessories business and the potential impact of political factors on gun sales.

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Questions & Answers

Q: What is the main focus of Smith & Wesson's business strategy?

Smith & Wesson's strategy is to enhance their position as a leading firearm manufacturer and expand their accessories business.

Q: How has the accessories business contributed to Smith & Wesson's revenue and profitability?

The accessories business has shown significant growth, with net sales increasing from $20.6 million in 2015 to $65 million in 2016. Gross profit also rose from $6 million to $32 million in the same period.

Q: What recent loss did Smith & Wesson experience and how did it impact their financials?

Smith & Wesson lost a contract with the US Army that was valued at $580 million over ten years. This loss could have potentially added $26-28 million to their bottom line. The stock suffered as a result.

Q: How do political factors, such as potential gun regulations, affect the firearm industry?

Political factors can impact gun sales significantly. After the Sandy Hook shooting and President Obama's reelection, gun sales spiked due to fears of potential gun bans. Conversely, with a Republican-run government, sales may decrease as there is less fear of gun regulation.

Summary & Key Takeaways

  • Smith & Wesson is a leading manufacturer of firearms and accessories, with a focus on the shooting, hunting, and outdoor markets.

  • They are rapidly growing their accessories business, which has shown significant profitability and potential for growth.

  • The company has increased their research and development spending to enhance existing products and develop new firearm and accessory products.

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