MagicDiligence

Sturm & Ruger's Brief Burst of Value

ttm: 265.596mm, 44.144mm op profit, 16.6% op margin
2008: 181.483mm, 13.537mm op profit, 7.5% op margin
2007: 156.485mm, 10.258mm op profit, 6.6% op margin
2006: 167.620mm, 0.922mm op profit, 0.6% op margin
2005: 154.722mm, 1.837mm op profit, 1.2% op margin
2004: 145.624mm, 7.024mm op profit, 4.8%

This is all directly from SEC filings. I agree that new management is doing a good job with manufacturing, but I would argue vociferously that ttm margin improvement is more due to 100% utilization than any sustained lean manufacturing. I've accounted for improvements in my higher op margin assumption, as well as in a sustained revenue figure, largely due to high ASPs for the SR-556, despite what is sure to be lower volume due to pushed up sales.

There are no factual errors in the analysis, and margin assumptions are of course open to speculation. The gun business is not a secular growth market (in fact probably the opposite), so I believe it is difficult to justify $200mm in revenue. It is competitive as well, making it difficult to justify margin assumptions that are significantly and sustainably higher than historical averages.