Cabelas Inc (CAB), Sturm, Ruger & Company (RGR) – Gun Bans: Good for Sales?

When Cabelas Inc (NYSE:CAB) last reported earnings it beat on both the top and bottom line by small margins. Comparable store sales were up 10.5%, and even when you exclude firearm sales comparable store sales were up 9%. This is a very bullish sign, as it means Cabelas Inc (NYSE:CAB) will be able to easily transition out of the firearm demand surge and still grow at a strong pace.

Cabelas Inc (NYSE:CAB) has a PE (trailing twelve months) of 23.7 and an expected growth rate of 17% for the next few years. In the short term Cabela’s will be able to outperform Wall Street estimates if firearm sales keep beating estimates and if the Hunger Games prompts strong archery sales.

In the longer term, Cabela’s has its next generation store rollout to boost sales. In the same quarter last year, Cabela’s had six of its next generation stores open, and in this quarter it had 12. Profit and sales of these same store sales were 40% higher than its traditional stores, and comparable same store sales were 600 basis points (6%) higher than traditional stores’ 16.5% rate.

Final thoughts

Even if gun sales start to moderate and the upcoming election cycles don’t create a surge in sales, Smith & Wesson still is a good investment as it is raising its guidance and is still expected to grow next year. Because it is still expected to grow, its margins will be able to stay at elevated levels and this will increase the bottom-line.

Cabela’s offers a great investment opportunity, as same store sales are very strong and its long term growth prospects with its next generation stores are very robust. With sales and profits at these stores 40% stronger, and same store sales growth 60% higher than at traditional stores, Cabela’s has a long growth runway.

Sturm & Ruger’s has a very strong dividend and a great payout history, but the drop-off in EPS next year is a very big hurdle to get over and not worth risking when Cabela’s could offer you 20% EPS growth and strong same store sales.

The article Gun Bans: Good for Sales? originally appeared on Fool.com and is written by Callum Turcan.

Callum Turcan has no position in any stocks mentioned. The Motley Fool owns shares of Sturm, Ruger & Company. Callum is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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