When America protests, gun stocks rally. It’s a simple truth that has been true for years.

During the Occupy Wall Street demonstrations of late 2011, following the late 2014 protests in response to the police killing of Michael Brown, during the 2015 Baltimore movement against police brutality, in the midst of the 2017 St. Louis protests, gun stocks rallied.

The pattern is crystal clear. Widespread American protests spur gun stock rallies, mostly on the idea that civil unrest incites widespread fear, driving greater consumer demand for firearms. It should be no surprise then that, amid recent protests across America in response to the killing of George Floyd, gun stocks have been in rally mode.

With that in mind, let’s take a closer look at 5 guns stocks which are rallying

• Smith & Wesson Brands (NASDAQ:SWBI)
• Sturm, Ruger & Company (NYSE:RGR)
• Vista Outdoor (NYSE:VSTO)
• Axon Enterprise (NASDAQ:AAXN)
• Sportsman’s Warehouse (NASDAQ:SPWH)

It should also be no surprise that, given that today’s protests seem more intense and widespread than many of the aforementioned instances, gun stocks are rallying more than they have during those previous protests as well. Indeed, many gun stocks are up 30% or more over the past month.

Gun Stocks Rallying Amid Protests: Smith & Wesson Brands (SWBI)

The purest play on rising gun demand, Smith & Wesson Brands is presently benefiting from huge tailwinds in the firearms market.

First, you had the novel coronavirus pandemic, which from a public perception standpoint, was as close to a real-life, end-of-the-world scenario as we’ve seen in recent memory. That boosted demand for guns as consumers hunkered down and prepared for the worst.

Then, you got a series of disruptive protests across all of America, the likes of which represent the most civil unrest this country has seen in recent memory, too.

Going straight to the numbers, firearm background checks in the U.S. rose 80% in March, 62% in April, and 75% in May.

As that happened, SWBI stock soared. from lows of $5.50 in March to above $15 today.

At present, SWBI stock trades at 1.4-times sales, markedly above the stock’s five-year-median sales multiple of 1.2, per YCharts. Thus, in order to hold onto recent gains, SWBI stock needs robust firearm demand trends to persist for the foreseeable future.

But will they? That’s tough to say. And that’s why SWBI stock looks risky up here, on the heels of a meteoric rally.

Sturm, Ruger & Company (RGR)

The other pure play on rising gun demand, Sturm, Ruger & Company has also been on fire over the past few months.

RGR stock is up more than 50% over the past three months alone on the back of huge growth in the number of firearm background checks over the past three months.

Yet much like SWBI stock, RGR stock now trades at a premium valuation. The stock’s five-year-median sales multiple? Right around 2, per YCharts. Today’s sales multiple? Above 3.

The same is true on a price-to-earnings basis and a price-to-cash-flow basis. RGR stock trades at a steep premium to its historically average valuation.

The implication is clear. RGR stock needs firearm demand to remain robust for the next several months in order to justify its recent rally.

But that may not happen. The Covid-19 pandemic has been slowly unwinding. History says that major unrest and protests typically don’t last that long.

So by the back-half of 2020, firearm demand could cool off. If it does, RGR stock could be due for a steep drop.

Vista Outdoor (VSTO)

Vista Outdoor is an outdoor sports and recreation company which makes most of its money from the sales of guns.

Specifically, the company’s “Shooting Sports” segment — which comprises ammunition, reloading components and firearms — accounted for 52% of sales last year.

It should be no surprise, then, that VSTO stock is up 50% over the past three months on the back of surging consumer firearm demand.

Unlike RGR and SWBI though, VSTO stock is not trading at a premium valuation. The forward earnings multiple sits at 22. The trailing sales multiple sits at 0.35, and the trailing cash flow multiple sits at 8. All three of those multiples are below their historical averages.

Thus it’s reasonable to say that VSTO stock does not need robust firearm demand to persist to sustain its current rally. But if robust firearm demand does persist, VSTO stock could have major upside.

As such, when it comes to playing the gun rally, VSTO stock seems like a far better pick than pure-plays RGR and SWBI, given its far better risk-reward profile.

Axon Enterprise (AAXN)

The most interesting name among these rallying gun stocks is mid-cap technology company Axon.

Axon — which makes and sells things like tasers, body cameras, dash cameras and cloud computing solutions to law enforcement agencies — has long been viewed by Wall Street as a stock to buy when the world is focused on police brutality issues. That’s because many investors see the products and services which Axon provides as tools which can help alleviate those issues.

After all, Axon’s own stated mission is to: 1) obsolete the bullet by making less-lethal tasers the gold standard, 2) reduce social conflict through the widespread usage of cameras to increase transparency and 3) enable a fair and effective justice system with data-driven, cloud-hosted software systems.

It should be no surprise, then, that AAXN stock is up more than 30% since late May.

This rally will extend not just for the rest of 2020, but for the rest of the decade too. The reality is that Axon is pioneering revolutionary and much-needed change across all of law enforcement, well beyond the scope of just tasers and cameras. They are providing a suite of cloud-hosted, automated, and data-driven software systems which aim to modernize, and therefore optimize, all aspects of law enforcement.

In so doing, Axon is turning into the ubiquitous digital backbone of the future of law enforcement. Ultimately, that means Axon’s revenues, profits and stock price will continue to soar.

Sportman’s Warehouse (SPWH)

Last on this list of gun stocks is outdoor sporting goods retailer Sportman’s Warehouse.

With 2013 stores across 27 states, Sportman’s Warehouse has the largest outdoor specialty store base in the Western United States and Alaska. And at the center of this big store base are firearms.

The company’s “Hunting and Shooting” department — which comprises ammunition, archery items, firearms and reloading equipment, among other things — has consistently accounted for about 50% of the company’s total sales over the past several years.

That’s why, amid soaring firearm demand across the country, SPWH stock has nearly doubled over the past three months, currently trading at its highest levels since 2016.

There’s reason to be optimistic. The retailer recently reported fourth quarter numbers that largely outperformed expectations. More importantly, the outdoor sporting goods retail market is controlled mostly by regional and local players, leaving ample room for a national retailer like Sportman’s to geographically expand, consolidate the category and grow share.

But the stock has come very far, very fast. At current levels, it’s trading at essentially double its historically normal forward and trailing earnings multiples.

So, while the long-term growth potential for Sportman’s Warehouse looks promising, SPWH stock appears out over its skis here and now.