Small cap gun stocks Smith & Wesson (NASDAQ: SWHC) and Sturm Ruger & Co. (NYSE: RGR) have been big winners for investors for some time, but perhaps its time for investors to consider TASER International (NASDAQ: TASR) as an alternative as gun stock share prices start to level off.
What is TASER International?
Founded in September 1993, TASER International develops, manufactures and sells electronic control devices (ECDs) designed for the law enforcement, military, corrections, private security and personal defense markets with law enforcement agencies being the principal target market. Unlike the products Smith & Wesson and Sturm Ruger & Co. develops, TASER International’s technology is designed to protect life and reduce injury rates for law enforcement officers and suspects - meaning would be TASR investors need to also keep an eye on the current gun control debate.
What’s Happening With TASER International Right Now?
TASER International is a steady issuer or press releases or the subject of sales reports of its products to various government agencies and such. What’s interesting for investors is a late February announcement about a new share repurchase program for up to $25 million worth of TASR stock. That will certainly help to move share prices higher or at least provide them with a floor.
However, it should also be noted that earlier in February TASER International had reported a 51% fourth quarter revenue increase to $32.1 million as law enforcement agencies upgraded to a new stun gun model, plus the company’s stun gun business rose 47% to $9.6 million and revenue from its video business (e.g. cameras for police use) more than doubled to $1.8 million. Moreover, TASER International reported net income of $3.8 million for the quarter verses a net loss of $5.9 million for the same period the year before plus the company earned $14.7 million for 2012 verses a net loss of $7 million for 2011.
Unfortunately, investors were not impressed by even those impressive results and shares took a double digit hit perhaps because some investors took a closer look at valuations. On the valuation side, TASER International has a trailing P/E of 29.44 and a forward P/E of 24.84; but Smith & Wesson has a trailing P/E of 9.25 and a forward P/E of 8.26 while Sturm Ruger & Co. has a trailing P/E of 14.09 and a forward P/E of 21.14 according to Yahoo! Finance (It should also be mentioned that TASER International and Smith & Wesson pays no dividends while Sturm Ruger & Co. has a forward dividend of $1.62 and a forward dividend yield of 3.1%).
Nevertheless, sales are clearly growing at TASER International and the company could still grow into its more lofty P/E ratio.
TASER International’s Performance Verses Smith & Wesson and Sturm Ruger & Co.
Right now TASER International has a market cap of around $408.75 million while Smith & Wesson has a market cap of $596.30 million and Sturm Ruger & Co. has a market cap of $977.21 million. On the performance side of things though, its clear that gun stocks Smith & Wesson and Sturm Ruger & Co. have been the bigger winners for investors over the long term as the following chart shows:
However, technicians might want to take a quick look at the recent charts for all three stocks:
The Bottom Line. So what should investors and traders alike do? Sure, small cap TASER International has a rather high valuation or P/E verses gun stocks Smith & Wesson and Sturm Ruger & Co., but the charts of the latter should be a concern for any new investors thinking of getting in to gun stocks at this point in time. Likewise, the success or failure of a gun control bill will have a big impact on gun sales and indirectly, on the sales of TASER International's products - something investors with a long-term time horizon needs to consider.