Stock Analysis

Here's Why I Think Sturm Ruger (NYSE:RGR) Is An Interesting Stock

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NYSE:RGR
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Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Sturm Ruger (NYSE:RGR). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for Sturm Ruger

How Fast Is Sturm Ruger Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Impressively, Sturm Ruger has grown EPS by 37% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The good news is that Sturm Ruger is growing revenues, and EBIT margins improved by 13.8 percentage points to 24%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NYSE:RGR Earnings and Revenue History June 22nd 2021

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Sturm Ruger EPS 100% free.

Are Sturm Ruger Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Sturm Ruger insiders have a significant amount of capital invested in the stock. To be specific, they have US$24m worth of shares. That's a lot of money, and no small incentive to work hard. Despite being just 1.6% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does Sturm Ruger Deserve A Spot On Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Sturm Ruger's strong EPS growth. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. It is worth noting though that we have found 4 warning signs for Sturm Ruger (2 are a bit unpleasant!) that you need to take into consideration.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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What are the risks and opportunities for Sturm Ruger?

Sturm, Ruger & Company, Inc., together with its subsidiaries, designs, manufactures, and sells firearms under the Ruger name and trademark in the United States.

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Rewards

  • Price-To-Earnings ratio (9.2x) is below the US market (15.1x)

Risks

No risks detected for RGR from our risks checks.

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