All is not well at arms maker Smith & Wesson (NASDAQ:SWHC).

For the second time in as many months, management issued a warning on sales trends last week, joining a string of companies issuing similar dire forecasts that stretches from Palm (NASDAQ:PALM) toFedEx (NYSE:FDX) toCitigroup (NYSE:C) toLowe's (NYSE:LOW). Having already talked down sales expectations to $325 million back in October, in Thursday's earnings report, S&W predicted just $300 million, 32% gross margins, and about $0.40 per share in profit. That last number, by the way, is 25% lower than management's October estimate -- which was itself a 16% reduction from management's guess just three months ago. All told, fully 37% of this year's expected profits have gone poof!

Where'd they go?
In the preliminary release, CEO Michael Golden mentioned a certain "softness in the market for hunting rifles and shotguns, driven by lower than expected consumer demand, a buildup of pre-season retail inventories, and unseasonably warm autumn weather." That trend seems to have taken a larger toll than management feared as recently as six weeks ago. Golden says we're in the middle of an "industry-wide inventory buildup, accentuated by lower retail traffic."

With piles of guns lying around, and everyone competing to make a sale, S&W's rival gunsmiths are "offering significant discounts on both long guns and handguns. This caused increased price competition in the channel and served to exacerbate already inflated inventory levels" (emphasis added).

Which one is the shootin' end?
Huh? OK, I get that high inventories have caused gun makers to compete on price, hurting profits. But how do "significant discounts ... exacerbate already inflated inventory levels"? Seems to me, the opposite should happen. If everybody cuts prices, inventories should fall as customers snap up cheap guns. I have to admit -- the apparent logical disconnect here doesn't give me a whole lot of confidence that management knows what it's talking about.

The more so because these guys seem confused about a lot of things. In trying to provide clear guidance for the rest of the year, it appears that S&W obfuscated matters further by mixing up its definitions of free cash flow and operating cash flow. After retranslating the release back into English, though, it seems that S&W is projecting cash from ops will be $29 million this year; minus $16 million in capital spending, that will leave $13 million in free cash flow.

Foolish takeaway
If you can work your way through management's language issues, that leaves us with a firm valued at roughly 21 times this year's free cash flow, expected to grow at 25% per year over the next half decade. If you ask me, the resulting price-to-free cash flow-to-growth ratio of 0.84 should make this stock a candidate forDirt Cheap Dream Stocksstatus -- that is, if you still have any confidence at all that management knows what it's talking about.

What did we expect out of S&W last quarter, and what did we find? Read about it in:

Fool contributor Rich Smith does not own shares of any company named above. Palm and FedEx are Motley Fool Stock Advisor selections. The Motley Fool has a disclosure policy.