7 Most Undervalued Defense Stocks To Buy According To Analysts

05. Sturm, Ruger & Company, Inc. (NYSE:RGR)

Upside Potential: 24.24%

Forward Price to Earnings (P/E) Ratio: 14.23 

Number of Hedge Fund Holders: 14

Sturm, Ruger & Company, Inc. (NYSE:RGR) stands out as a compelling candidate in the defense sector, known for its design, manufacturing, and sales of firearms across the United States. The company operates through two main segments: Firearms and Castings. With a diverse range of products, including rifles, pistols, and revolvers, Sturm Ruger has established itself as a trusted name in the firearms industry, making it a valuable addition to any portfolio focused on defense stocks.

In its Q2 2024 earnings call, Sturm, Ruger & Company, Inc. (NYSE:RGR) reported net sales of $130.8 million and diluted earnings of $0.47 per share, showcasing resilience in a challenging market. Although sales have declined compared to the previous year, the company’s proactive measures—such as increasing production by 18% and focusing on efficiency—have positively impacted profitability. The company’s robust financial position is highlighted by its $106 million in cash and short-term investments, zero debt, and a current ratio of 4.8 to 1, ensuring it has ample liquidity to capitalize on future opportunities.

The commitment to shareholder returns is evident, as Sturm, Ruger & Company, Inc. (NYSE:RGR) returned $27.1 million to shareholders in the first half of 2024 through dividends and share repurchases, indicating strong confidence in its business model. Notably, new product sales constituted 31% of total firearm sales in the first half of 2024, reflecting the company’s innovative approach. Recent product launches, such as the American Rifle Generation II and Marlin lever-action rifles, have generated strong demand, leading to a significant reduction in inventory levels.

Looking forward, Sturm, Ruger & Company, Inc. (NYSE:RGR) disciplined pricing strategy and focus on innovation position it well for long-term growth. As demand stabilizes and production ramps up, the company is poised to leverage its strong market presence. Analysts view Sturm Ruger as undervalued, suggesting that the stock is an attractive buy for those seeking exposure to the defense sector. Overall, Sturm, Ruger & Company, Inc. (NYSE:RGR) solid fundamentals, commitment to shareholder value, and innovative product pipeline make it a prime candidate for investment in the defense industry.