The U.S. is in the midst of a gun sales boom, but while surging sales figures for firearms manufacturers are making headlines, what is often overlooked is that there has been an equally dynamic jump in demand for ammunition. Obviously, one begets the other.

And just as leading gunmakers Smith & Wesson Brands (SWBI -0.43%) and Sturm, Ruger (RGR 0.28%) have found it difficult to keep pace with consumer demand for weapons, ammo companies have also found it hard to produce enough of their products. In a market experiencing white-hot growth across the board, these two stocks in particular look unstoppable.

Dollar sign on rounds of ammunition

Image source: Getty Images.

1. Vista Outdoor

The owner of the market-leading Federal Premium brand of ammunition, Vista Outdoor (VSTO -0.14%) saw sales in its shooting sports segment jump 37% in the first quarter, and though its new and existing facilities have been working nonstop to fulfill orders, that hasn't been enough. It was also Vista's most profitable quarter ever.

Vista recently acquired the ammunition operations of Remington Arms and HEVI-Shot, which helped fulfill its need for additional capacity, though demand still outstripped the industry's constrained supply chain, tariffs, and rising commodity costs.

The company's results were also supported by a robust collection of brands in its outdoor products segment, which saw sales surge by 47% last quarter as the lingering impact of the pandemic kept pushing people to spend more time outside.

Vista's stock price is up nearly 60% thus far in 2021, and more than 400% higher over the past twelve months, yet it still trades at a significant discount. Shares trade at 8 times trailing earnings and 13 times next year's estimates, and with analysts forecasting Vista to grow earnings at a compound annual rate of 25% for the next five years, it goes for just a fraction of that projected growth.

Vista Outdoor also trades at 8 times its free cash flow -- a deeply discounted valuation. Given that there's no sign that the strong demand for ammo and outdoor gear will let up anytime soon, the stock appears to be a natural target for growth-seeking investors.

2. Olin

Though it owns the storied Winchester brand of ammunition -- and though ammo is its oldest business -- Olin (OLN -0.46%) is often viewed first as a specialty chemicals manufacturer. Ammunition accounted for only 20% of its revenue last quarter, so that's understandable, but the segment's growth -- sales doubled to $389 million -- far outstripped the gains of the rest of the business.

Supplying the U.S. military has also helped Olin's ammo segment; in 2019, the company won a seven-year contract to operate the Army's Lake City munitions plant in Missouri, its biggest small-caliber ammunition production facility. That proved fortuitous because Olin can not only make military ammo there, but commercial ammo as well. That contract could be extended for an additional three years.

Olin had expected to generate about $50 million in EBITDA annually from the plant, but is now doing about that per quarter, and as the popularity of shooting sports surges and new firearms owners are brought into them, the need for ammunition will remain elevated.

Look for Olin's Winchester segment to experience outsize growth for years as this durables niche of the consumer products industry seeks a new level of equilibrium.