Is Sturm, Ruger & Company (RGR)’s New Plant a Bad Idea?

Then again …
It’s also quite possible Sturm, Ruger & Company (NYSE:RGR) got a great deal on the property and that the financial outlay may not be all that significant. After all, the company did already tell investors it planned to spend a total of $30 million in capital expenditures by the end of this year, and as of the end of last quarter, it had no debt with cash and equivalents of $45.6 million on its balance sheet. What’s more, Sturm, Ruger also managed to generate $30.4 million in cash from operations during last quarter alone.

In addition, remember that new products represented around 35% of all Sturm, Ruger’s firearm sales last quarter, so it’s obvious consumers are responding well to the company’s latest offerings. As a result, if Sturm, Ruger is managing to take market share from its competitors, it’s possible the company could still make use of the new facility even after today’s record demand wanes.

In the end, then, over the short term this seems like a great idea, but long-term investors would be wise to keep an eye on firearms industry demand to see how it affects Sturm, Ruger & Company (NYSE:RGR)’s distributor inventory levels.

But what do you think? Is Sturm, Ruger’s new manufacturing plant purchase a bad idea? Feel free to weigh in using the comments section below.

The article Is Sturm, Ruger’s New Plant a Bad Idea? originally appeared on Fool.com and is written by Steve Symington.

Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of Sturm, Ruger.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.