Smith & Wesson: Not a Thing of Beauty But Almost Worth A Shot

| About: American Outdoor (AOBC)

Smith & Wesson Holding Corporation (SWHC) broke out from a cup and handle base today after reporting outstanding earnings and sales growth.

Smith & Wesson is a manufacturer and exporter of handguns. The Company manufactures revolvers, pistols, and related products and accessories for sale primarily to gun enthusiasts, collectors, hunters, sportsmen, protection focused individuals, public safety agencies and officers, and military agencies in the United States and throughout the world. It also markets tactical rifles. The Company has manufacturing facilities in Springfield, Massachusetts and Houlton, Maine, both of which are primarily used to manufacture its products. In addition, the Company pursues opportunities to license its name and trademarks to third parties for use in association with their products and services. In January 2007, the Company completed the acquisition of Thompson/Center Arms, Inc., a designer, manufacturer and marketer of hunting firearms.

FUNDAMENTALS: Smith & Wesson is a company with a fairly erratic history of growth, but one that has found some consistency and fantastic growth over the past five quarters. Quarter over quarter, earnings have at least doubled in each of the last five quarters with quarter over quarter sales growth of around 40%. Margins aren't outstanding in a comparison of all companies, but when compared to other companies in its industry, it's well above the average at around 6%. Return on Equity is a whopping 28%, indicating strong management. Earnings growth is expected to be outstanding through 2007 (75%) and 2008 (94%).

TECHNICAL: Looking at the overall cup and handle base, it's not a thing of beauty but it may work out. The shape isn't bad, but the sell volume in the left side and the fairly weak buy volume in the right side is a bit of a concern, but the high volume gap up break out today is a big plus. Given current market conditions, I won't be jumping into this one right now, but it should be near the top 'o the watch lists for when the market gets back on its feet.

Full Disclosure: Author has no position in Smith & Wesson at time of writing.


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Tagged: , Aerospace/Defense Products & Services
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