After U.S. gun sales soared 63.9% in 2020, last year’s modest decline seems to show that the civilian firearms business remains strong. Consultancy Small Arms Analytics & Forecasting (SAAF) earlier this month estimated that calendar year 2021 sales were nearly 20 million units, down 12.5%.
The firm’s estimates are based on data taken from the FBI’s National Instant Criminal Background Check System (NICS), adjusted for checks unlikely to be related to end-user firearms sales, according to a Jan. 5 press release. However, SAAF does make the caveat that “adjusted NICS numbers may still underestimate the actual unit sales level by some amount.” With no national gun registry, industry publications and background checks are the best sources for gauging sales, CNN reported last year.
Gun sales soared during the height of the pandemic in 2020 and remained high for over a year. The deadly combination of the pandemic, protests and politics has led to a surge in gun purchases and the value of gun stocks. The U.S. continues to see surging crime.
The economic uncertainty from the pandemic had people fearing for safety. Moreover, sales increased dramatically during the nationwide protests in 2020, with the elections being the cherry on top. Hence, gun stocks have become highly attractive investments in the past year and will continue to perform well for the foreseeable future.
Gun Stocks To Buy: Smith & Wesson Brands (SWBI)
Smith & Wesson Brands is a leading American producer and designer of firearms. It develops a wide variety of firearms, including handguns, long guns, suppressors and other items.
Revenue in fiscal 2021 (April end) rose by over 80%, exceeding $1 billion, and it continues to perform impressively in its latest financial year.
The company’s handsome product sales result from a hefty increase in average selling prices. However, it isn’t stopping anytime soon, as the last couple of quarters shows a handsome 5.65% increase in revenues from the prior-year periods to $505 million. Moreover, the company has also been doing extremely well in terms of EBITDA growth on a year-over-year basis to over 100%.
With the guns and accessories market expected to grow at over 6%, Smith & Wesson and its other competitors are likely to enjoy an incredible time ahead. Moreover, SWBI stock is also trading below one times forward sales.
Vista Outdoor (VSTO)
Vista Outdoor operates as a manufacturer and marketer of shooting sports and recreational products. It has 16 facilities for distribution and manufacturing spread across the North American region.
Moreover, despite having a hugely successful outdoor equipment business, the company makes the lion’s share of its revenues through its shooting sports segment.
In the past few years, the operating performance achieved by the company has been inconsistent. Revenues dipped from $2.5 million to $1.76 billion from 2017 to 2020. However, sales shot up to $2.2 billion the following year. Moreover, its current year growth is impressive, with revenues during the first half of 2022 rising to $1.4 billion compared to $1.05 billion.
Additionally, the management has also raised the fiscal year 2022 guidance by over 30% compared with the consensus. The company management expects revenues to rise to 10% per annum by 2024. Moreover, despite these numbers, VSTA stock trades at below one time’s forward sales.
Ammo (POWW)
Ammo is a developer of ammunition products for long and handguns in the U.S. and overseas markets. It is one of the fastest-growing companies in the sector, boasting five-year revenue growth of over 210%. Moreover, POWW stock trades at just 2.3x forward sales. Hence, it’s arguably one of the most attractive investments in the sector.
Recent results for the company have been stellar. The first six months of its latest financial year have shown a healthy improvement in revenues, gross margins, and net income levels. Sales and gross margins are up by triple-digit percentages while generating a healthy $23.6 million net profit. Hence, the business is excellent and is likely to grow at a rapid clip for the foreseeable future.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
