Smith & Wesson Holding Corporation (SWHC), Sturm, Ruger & Company (RGR), Alliant Techsystems Inc. (ATK): Three Ace Stocks for Firearms Investors

Currently, Sturm, Ruger & Company (NYSE:RGR) trades at a P/E ratio of 12. As with Smith & Wesson Holding Corporation (NASDAQ:SWHC), I believe the company’s P/E ratio is depressed by record earnings. However, with a shareholder-friendly management and no debt, Sturm, Ruger & Company (NYSE:RGR) is definitely one company to keep an eye on.

Alliant Techsystems Inc. (NYSE:ATK) is a defense contractor focused on aerospace and defense, ammunition, and accessories, with U.S. government customers making up 67% of its sales. Ammunition and accessories make up 40% of Alliant Techsystems Inc. (NYSE:ATK)’s revenue in fiscal 2013. Of that 40%, 14% came from Alliance’s contract to run the Lake City Army Ammunition Plant, which lasts until 2020. This past fiscal year the plant produced 1.8 billion rounds at the facility. The other 26% of the 40% comes from ammunition and accessories sales, where Alliant Techsystems Inc. (NYSE:ATK) sells under the brand names Federal Premium, Fusion, and Eagle. Its Aerospace group made up 29% of the company’s sales in fiscal 2013, selling rocket motors as well as composite components for aircraft and missiles.

Alliant Techsystems Inc. (NYSE:ATK) initiated a dividend in 2011 and raised it last year to $0.26 per quarter for a yield of 1.3%. The company recently announced a buyout of Savage Arms owner Caliber for $315 million, which Fool contributor Rich Smith believes is not a great deal. The company is a cash flow machine but has been challenged by an underfunded pension plan. At 9.6 times earnings, Alliant Techsystems Inc. (NYSE:ATK) shares are tempting, but investors should tread lightly as sales are so dependent on the U.S. government.

Foolish bottom line
Three of the above stocks look cheap as long as people keep buying firearms at record rates. However, I’m not convinced gun purchases will remain high going forward now that the furor has died down a bit over gun control legislation.

The article 3 Ace Stocks for Firearms Investors originally appeared on Fool.com and is written by Dan Dzombak.

Fool contributor Dan Dzombak can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak. He has no position in any stocks mentioned. The Motley Fool owns shares of Sturm, Ruger.

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