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Why Sturm, Ruger & Company's Shares Jumped 19.5% Last Month

By Travis Hoium – Mar 9, 2016 at 11:03AM

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A surge in sales during the fourth quarter helped push this gun maker higher early in 2016.

Image source: Ruger.

What: Shares of Sturm, Ruger & Company (RGR 0.23%) surged 19.5% higher in February after the company reported better-than-expected earnings, a turn from fairly disappointing results in 2014 and most of 2015.

So what: Sales jumped 24% in the fourth quarter to $152.4 million and earnings popped from $0.77 a year ago to $0.88 per share. The earnings figure topped estimates by an incredible $0.13. This resulted in slight top-line growth for the full year in 2015 after a down year last year.  

Now what: Earnings and profits still haven't recovered to 2013 levels, but conditions are certainly stronger than a year ago and well ahead of analysts' expectations. The bigger question is whether this is short-term growth or a longer-term trend. The 2014 surge in sales was driven by worries about gun control, but that push has largely died down. I don't see any reason gun sales will boom in 2016, and with shares trading at a lofty 23 times earnings, this is a pop I'm not going to jump into right now.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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