8 Best Small Cap Defense Stocks to Buy Now

6. Smith & Wesson Brands, Inc. (NASDAQ:SWBI)

Market Cap: $589 million

Number of Hedge Fund Holders: 15

Smith & Wesson Brands, Inc. (NASDAQ:SWBI) is a firearm manufacturing company headquartered in Maryville, Tennessee. It is one of the leading makers of long guns, handguns, rifles, and other shooting equipment. The company has been operating since 1852 and sells its products to various customers, including competitive shooters, firearm enthusiasts, security agencies, individuals desiring personal protection, sportsmen, and hunters.

In its recent Q1 2025 Earnings Call on September 5, Smith & Wesson Brands, Inc. (NASDAQ:SWBI) reported net sales for the quarter at $88.3 million, down 22.7% year-over-year, driven by softer firearms demand amid broader inflationary pressures on consumer spending. The gross margin of 27.4% was 0.8% higher compared to the same period last year. This was primarily attributed to increased absorption on higher production, a price increase that went into effect in January, and lower inventory reserve adjustments and relocation costs. The company also saw an increase in interest expense during the quarter, which coupled with the lower revenue, resulted in a net loss of $2.1 million.

Despite a challenging quarter, Smith & Wesson Brands, Inc. (NASDAQ:SWBI) has maintained its outlook for the fiscal year. It has been encouraged by the successful launch of new products and saw positive momentum in demand toward the end of Q1. The company expects sales to grow significantly during the second fiscal quarter as it enters the busy fall season. Sales growth is anticipated to be 5% to 10% higher year-over-year, which will also further improve gross margin.

From a balance sheet perspective, Smith & Wesson Brands, Inc. (NASDAQ:SWBI) accelerated share repurchases during the quarter and bought back nearly 871,000 shares worth $13 million. It also paid $5.9 million in dividends and ended Q1 FY2025 with $35.5 million in cash and $70 million in line of credit borrowings.

The sentiment around the stock is generally bullish. Wall Street analysts have a consensus Strong Buy rating for SWBI, with a share price upside potential of 38%. According to Insider Monkey’s database for Q3 2024, 15 hedge funds held a stake in the company. Smith & Wesson Brands, Inc. (NASDAQ:SWBI) is among the best defense stocks to buy now.