Will Smith & Wesson Keep Impressin'?

Though sociopolitical implications are at an all-time high, guns continue to be a great business to be in. Simply put: Gun lovers consistently buy guns -- more so when there are calls for more stringent laws and a Democrat in the White House. Smith & Wesson Holding  is continued proof of this, as the company again delivered better-than-expected earnings and guided for more good times to come in the current quarter. The gun maker, even with its two-year, 235% stock price run, still trades at a relatively cheap forward earnings multiple, and demand does not look to be dropping anytime soon. Is there any reason Smith & Wesson won't keep going up?

Sales grew 2% to $139.3 million for Smith & Wesson's fiscal second quarter. Analysts had expected $1.5 million less. On a unit level, though, things were much more appealing, as handgun sales rose 27%, with gains offset by higher costs. Gross profit and margin increased by quite a bit more due to manufacturing efficiencies and product mix. The margin went from 35.5% of net sales in last year's second quarter to 41.6% for the just-ended quarter.

On the bottom end of the income statement, the company hauled in $0.28 per share -- a huge premium to analyst expectations of just $0.21 per share.

For the current quarter, management guided for $140 million to $145 million in sales, with a projected GAAP diluted earnings per share of $0.28 to $0.30. Analysts were pleasantly surprised here as well. Looking ahead to the full year 2014, though, management did not increase its guidance even with the quarter's outperformance. The company stuck by sales projections of $610 million to $620 million, and GAAP EPS of $1.30 to $1.45.

Does this suggest that sales won't impress as much in the coming periods?

Justified multiple
As mentioned above, Smith & Wesson looks relatively cheap at just nine times forward earnings, but maybe that's because the market has factored in less demand going ahead.

Management was bullish about both the recent and coming results, but it was odd to see that full-year guidance remain at pre-existing levels. As mentioned in a KeyBanc analyst report, gun demand looks to be slowing after a multiyear run, and this may be already baked into the stock price.

In the long term, these are products that will always have buyers. We may see the forecast drop off, and the stock might not perform as phenomenally as it has in the past few years, but Smith & Wesson is an industry leader with the potential to generate attractive long-term gains. Investors are wise to take a close look at its current levels.

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The article Will Smith & Wesson Keep Impressin'? originally appeared on Fool.com.

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