Image source: TASER International.
TASER International (AXON -0.74%) and Sturm, Ruger & Co. (RGR 1.10%) have a lot of similarities in that they're major suppliers to law enforcement and those looking for self defense. But that's where most of their similarities end.
Sturm, Ruger & Co. has benefited greatly over the past decade from the fear that gun control will come to the U.S., as it has in most of the developed world, causing a surge in demand for guns. The company has ridden that wave to growth for a decade, and that has benefited investors.
TASER International, on the other hand, is primarily a law enforcement company, selling less lethal tasers and body cameras intended to improve law enforcement. In today's environment, which stock is better for you?
Axon body camera. Image source: TASER International.
The growth title is clear
There's no question that Sturm, Ruger & Co. has benefited greatly from the increase in gun sales over the past decade, but that ride appears to be over. Sales have fluctuated over the past few years and actually fallen dramatically from their peak.
Meanwhile, TASER International has seen sales grow consistently, driven by taser sales and now the Axon and Evidence.com lines of products -- and that growth shows no sign of slowing. Evidence.com, which is used to store body camera video on the cloud, has booked about 75,000 licenses, which will be recurring revenue for years to come. And the adoption of body cameras is only picking up as law enforcement starts to see the benefits it provides to the community.
RGR Revenue (TTM) data by YCharts.
If you're looking for growth in this business, TASER International is the safer bet.
The regulatory picture also favors TASER International
There's been a lot more fear of gun regulation than actual gun regulation in the past decade, but that doesn't diminish the fact that guns are far more likely to be slapped with regulation than tasers or body cameras in the future. In fact, in the battle over gun control, tasers and body cameras have become valuable tools for law enforcement.
I don't think regulation or the fear of it is the best reason to buy a stock, but knowing whether it could be a tailwind or a headwind is important. And in this case, TASER International has much more tailwind potential than Sturm, Ruger.
Value is a tough call
On a price/earnings ratio, TASER International is far more expensive than Sturm, Ruger & Co. That makes some sense given the company's faster and more consistent growth rate, but it's also because TASER has been investing heavily in growth opportunities like Evidence.com and the Axon line of body cameras, suppressing earnings. If you look at the price/sales ratio below, you can see that its premium is a little lower than the P/E difference indicates, but it's still a much pricier stock.
TASR PE Ratio (TTM) data by YCharts.
Despite the higher premium on the market, I think think TASER International is the better stock to own today. It has a faster growth rate, a bigger international market opportunity, and less regulatory risk than Sturm, Riger & Co. I see a bright future for less lethal weapons and body cameras that will improve law enforcement, something I don't see being the case for the gun industry.
