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Texas (01/21/2014) - I have rated Smith & Wesson Holding Corporation (NASDAQ: SWHC) a Buy, based on a recent price of $14.28 and a fair value estimate of $28-$33.

The company, founded in 1852, engages in the manufacture and sale of firearm products in the United States and internationally, offering firearms, handguns including revolvers and pistols, long guns such as sporting, bolt action, and single shot rifles, hunting rifles, black powder firearms, handcuffs and restraints, and firearm related products and accessories.

At the end of fiscal 2012 the company made the commitment to, in effect, get its "act" together in fiscal 2013. In reviewing the company's annual financials, I salute management and all the employees for a year well done. Collectively, their "act" as it were, is together. The question is, can they keep it together?

The company made the commitment to increase shareholder value during fiscal 2013 and it achieved that goal in remarkable fashion with a year-over-year increase in intrinsic value of 60%. Additionally, the company increased sales by 43%, free cash flow by 150%, and earnings by 99%.

The company also increased its debt by 56%.

Certainly I am not a fan of debt because many times the only gain a company receives from an increase in debt, is, well, a greater debt burden. That is not the case with Smith and Wesson.

In this instance management was on point, and for this increase in debt the company exchanged existing Senior Notes for new Senior Notes, lowering the interest the company paid by 23%, removing $3.3 million of restricted cash from its books, and helping to increase the company's cash position by 88%.

Don't get me wrong, increasing debt did not all by itself increase the company's cash position. But it did free up resources and allowed the company to put those resources to work elsewhere thus contributing to an increase in the company's cash position.

While all of those attributes are certainly things to applaud management for, there are some things that I still have issues with as I consider them wasteful.

The first one is the company's $100 million stock buyback plan. How utterly ignorant. Certainly there are business reasons that may require a company to buy back its shares, and those are simply a cost of doing business. But $100 million is a lot of money, money that I would think could be put to better use.

Granted, management can cancel the program at anytime, and the buyback spend will be spread out over several years, I get all of that. But instead of spending that money on buying back shares, why not spend it on debt reduction, or heaven forbid, on a dividend program. I'm sure the company's shareholders would welcome a little something from the company at the end of the year..

I have no idea if management can keep the company moving in its current direction, market momentum and government bureaucracy being what they are. But what I do know is that for the past year, management planned their work and worked their plan, and it shows in their financial results.

And for that, I would have to rate the company a real straight shooter, worthy of your investment research.

Disclaimer: Wax Ink is a baseline equity research company not licensed or registered with any government agency and has no position in any stock mentioned.

Source: Smith & Wesson - Real Straight Shooters