Ruger vs. American Outdoor Brands Stock

The ongoing national debate about guns hasn’t dampened investor interest in owning Ruger (NYSE: RGR) and American Outdoor Brands stock (NASDAQ: AOBC) (formerly Smith & Wesson). Though the value of these stocks fluctuates when gun-related incidents make the news, they are still a popular choice in diversified portfolios. However, as in any industry, there are significant differences between companies, and these differences can impact the returns on your investment.

The Pros and Cons of Investing in Gun Manufacturers

Before choosing to invest in a gun manufacturer, it is important to know what you are getting yourself into. After all, this industry faces constant legal, societal, and political pressure. On one side, gun ownership has deep roots in United States culture dating back to the birth of the nation. Many Americans believe that gun possession is a basic right of all citizens.

On the other side, there is serious concern with the dangers presented by the ease and volume with which guns are made available. People on both sides of this debate have strong opinions, and for many, this is the defining issue that determines their voting choices.

The purchase of stock in gun manufacturers can put you directly in the middle of that debate. As the pendulum swings from one side to the other based on the current political climate and national events, the value of your investment changes as well. If you choose to move forward, be prepared for a roller coaster ride.

Is American Outdoor Brands Stock Worth Buying?

Investors considering the purchase of stock in a gun manufacturing company have been known to lump Ruger and American Outdoor Brands into the same category. However, all gun manufacturers are not the same, and American Outdoor Brands has some important differentiators when compared to Ruger.

American Outdoors’ Smith & Wesson brand has the same strong reputation as Ruger, but for different reasons.

Though both have a large presence in the handgun market, Ruger’s biggest impact is in the shotgun market.

On the other hand, the Smith & Wesson Shield model is one of the most frequently purchased personal defense products available, and today, a full 50 percent of all revolvers are Smith & Wesson.

Many analysts believe that the area of personal defense is the best candidate for significant sales and revenue growth.

In addition to retaining its signature Smith & Wesson brand, American Outdoors (NASDAQ: AOBC) is branching out into other areas of the sporting goods and accessories industry. The company’s strategy appears focused on growth by acquisition, and so acquired companies are selected based on strict profitability criteria.

So far, American Outdoors Brands purchased Taylor Brands, a knife maker that has been a longtime Smith & Wesson partner.

American Outdoors also bought Crimson Trace, a leading laser-sight maker.

Through continued diversification of its product line, American Outdoors Brand may be better able to ride the ups and downs of public sentiment around guns and related gun control legislation.

Perhaps one reason for Smith & Wesson’s popularity originates from its place in American history. Legendary American outlaws and heroes relied on these handguns in the days of the wild, wild West. Either way, the American Outdoors Brand appears to have a positive future ahead.

Should You Buy Ruger Stock?

Gunmaker Sturm, Ruger & Company, Inc. (NYSE: RGR) is an industry leader.

The company had a banner year in 2016, and many investors still have the company in their portfolio. However, consumer demand for its products declined in 2017, and gross profits declined by 30 percent.

This brought the stock value down quite significantly, and the company has not yet recovered from the downward trend. Year-to-date, shares are down by an additional 12 percent at the time of our research.

Nonetheless, there are some very good reasons to consider Ruger stock.

To begin with, it is a well-established premium brand that produces high-quality product. Some consider this an opportunity to purchase shares at what is, in effect, a discounted rate.

In spite of the falling share price, the company doesn’t appear to be in any long-term financial trouble. In fact, from a financial perspective, Ruger (NYSE: RGR) is quite solid.

The company has $63 million available in cash, and no long-term debt to speak of, which positions it nicely for taking advantage of business opportunities. For example, Ruger has recently introduced a selection of new products, which has potential to drive sales.

Ruger vs. American Outdoor Brands Stock: Which Is Better?

When it comes to industry leaders, it’s hard to say whether Ruger or American Outdoor Brands is number one. Either way you lean, they are certainly both crucial contributors to the gun manufacturing landscape.

Unlike American Outdoor Brands, Ruger pays a dividend to each of its shareholders, though this is not fixed at a set rate. Instead, the amount is calculated as a percentage of earnings. For some investors, this is an important part of their purchase decision.

Overall, American Outdoors Brands appears to be a better buy. Historically, American Outdoors Brands have outperformed Ruger dramatically. In the past ten years, American Outdoors produced for investors a ballpark 1,000 percent return as compared to Ruger’s 250 percent. This, coupled with a bold diversification strategy, improves the likelihood of future strong returns on investment.

---

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.