Sturm, Ruger & Company: Charity Begins at Home

EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortization. It’s often confused with cash flow, and it’s pretty easy to, uh, massage. So, when the good folks at report that Sturm, Ruger & Co. -12.1 percent EBITDA growth is worse than Mattel’s and Hasbro’s, don’t pay it much nevermind. First, leisure industry? Second, cash on hand is a better measure of a company’s overall health. And Sturm, Ruger & Co. have plenty. Enough so that they decided to invest it . . . in themselves. In fact, if is trying to put buyers off Ruger’s stock, they ought to talk to the company . . .

Last week, Sturm, Ruger & Co. repurchased 412,000 shares of its common stock for $5.7 million, shelling out $13.83 per share. The shares account for 2.1 percent of the outstanding shares as of Q3 2010. Sturm funded the buy-back with cash on hand.

The company’s product portfolio is in excellent shape. The LCP is still a strong seller, and concealed carry permits are a growth area. The stock price peaked back in May, leveling out at around $15 for the last six months. Going back three years, it’s tripled. The cash flow’s looking good.

I reckon Ruger’s got it right. While it’s hard to see Ruger above $20 a pop in the short term, it’s a good time to buy back some shares for the execs, to reward them for pushing the gunmaker ahead of Smith & Wesson in terms of market share. If they can keep their branding strong and turn share into profits, the investment will pay off handsomely for all concerned. If not, not.

I’d consider taking a flyer on Ruger myself, only that would be a conflict of interest and I still haven’t forgiven the company for the Ruger letter. At least until they make something I really, really want.