1.
Dillan
Patel
Module
1
Assessment
Company:
Strum,
Ruger
&
Comp.
Sid#
24473163
Section:
104

2. Dillan Patel
SID-24473163
Gsi: Sarah Section: 104
Company: Strum, Ruger & Company [RGR]
1. Based on what you know about the company and your research, how does your
company make money?
Strum, Ruger & Company is a company that focuses on retailing a few key products,
mainly rifles, pistols and revolvers collectively known as firearms. The company [RGR] sells
these firearms to the public concentrated primarily in the United States while 3% of its
firearms sales come from international exports. 1% of the company’s overall sales are
generated from investments in the steel alloy industry. (The steel investments are both sold
and used internally in the manufacturing of firearms). So the company’s main source of
revenue comes directly from the selling of firearms and firearm accessories.
2. A) Using the company’s most recent Balance Sheet in the 10-K, demonstrate that the
Accounting Equation Holds. B) What is the company’s most significant Asset? Does this
make sense given the company’s business?
A) Accounting Equation: Assets = Liabilities + Shareholder Equity
Total Assets = $174,486
Total Liabilities = $79,454
Shareholders Equity = $95,032
B) The company’s most significant asset lies not directly in cash, but instead in Property,
Plant, and Equipment. This makes sense given that the company’s main source of revenue
comes from the distribution of manufactured firearms. The company sells firearms to a series
of distributors who then move products domestically. Strum, Ruger & Company’s firearms
are primarily marketed through a network of federally licensed, independent wholesale
distributors who purchase the products directly from the Company. Therefore the main
job of the company is not necessarily to pitch firearms to public, but more so to
manufacture firearms and leave the rest to the distributors. Therefore it makes sense to
see that the most valued asset [even after factoring in allowances for depreciation
($129,720)] lies in the properties, plans and equipment of the company.
3. Who is the Company’s audit firm?
The companies audit firm is McGladrey LLP.
A
=
L
+
SE
$174,486
=
$79,454
+
$95,032
$174,486
=
$174,486

3. 4. A) How is your company financed? B) What is their leverage ratio? C) How does it
compare to other companies in their industry?
A) Strum, Ruger and Company began operations in post world war II factories in the
United States. The company is currently one of the most dominant in the firearms industry
producing millions of firearms each year for hunting, target shooting, collecting, self-defense,
law enforcement, and government agencies. The company has a valued history, so valued
they even post this history on the front of their home page. A statement from the home page:
“Sturm, Ruger & Co., Inc. opened for business in 1949 with a meager $50,000 investment,
the Company faced serious doubts from industry insiders” (ruger.com/corporate/history.html).
With this initial investment, Ruggers was able to gross enough profit to maintain a cash
financed operation until 1990 when he went public on the New York Stock Exchange. Now
[RGR] is primarily financed through some company investments, shareholder investments
[look to leverage ratio](purchase of stock, cash investments, etc.), and of course, cash.
B) Leverage ratio =
𝑻𝒐𝒕𝒂𝒍 𝒅𝒆𝒃𝒕
𝒕𝒐𝒕𝒂𝒍 𝒅𝒆𝒃𝒕!𝑺𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓𝒔 𝑬𝒒𝒖𝒊𝒕𝒚
Total Liabilities = $79,454
Shareholders Equity = $95,032
Therefore, Leverage Ratio = .4553 or 45.53%
C) In order to compare companies, I have taken the leverage ratios of a few companies in
the industry to make more of an efficient analysis. Some companies in the same industry
include Smith and Wesson Holding Corp [SWHC] and National Presto Industries [NPK]
Company Name [symbol] Leverage Ratio Percentage
RGR .4553 45.53%
SWHC .4456 44.56%
NPK .1693 16.93%
These are two companies in a similar industry. When looking at the overall industry
average, somewhere in-between 39% - 48%, we can see RGR is right within the averages.
Comparing RGR to SWHC we see that the leverage ratios are actually quite close (within
2%). NPK however has an outstanding leverage ratio, one that surpasses the industry average
by a large percentage. Overall we can see that in fact RGR is right at “par” with the industry
average, proving it to be a somewhat stable company in this industry.
5. How would you characterize your company’s financial performance for the past 3
years, especially revenues and profitability?
Leverage
ratio
=
$79,454
$79,454
+
$95032

4. In order to determine company success in the past few years, many factors must be
analyzed including stock price increase, net profits, and revenues. Using the 10k as a starting
point we can see the overall growth (or lack thereof) of RGR in the past 3 years. When
looking at share price, in the past three years alone (from February 2011 to February 2014)
the stock price has increased by a huge percentage. Starting at initially $15.73 a share in
February of 2011, the price has dramatically increased to $73.65 a share; a percent increase of
around 361%. The chart below shows a graph of the price increase in stock.
Looking at stock price increase is one way of determining success of a company but
other factors must be considered to provide a holistic and more accurate analysis. Using the
company’s earnings announcement and 10k balance sheets we can compare individual items
such as net income, cash dividends per share, net sales and of course overall gross profit from
the past few years. Upon analyzing data from these forms, we can see a steady positive trend
of growth for the company in the past few years. For example, we see the net sales increase in
the company in thousands [2010: $255,206 2011: $328,816 and 2012: $491,824] we can see
that net sales have almost doubled in the past three years. Upon analyzing gross profit we see
a similar pattern, from $83,982 in 2010 to $178,953 in 2012. With these improvements across
multiple categories it is clear that the company is in fact on an upward / positive trend.
Therefore I feel confident in stating that the company’s financial performance in the past 3
years especially has been stable with a steady positive growth rate.

5. 6. A) Compare your company’s 2013 and year-to-date 2014 stock price performance
with the broader set of firms from related indices (I’ve used same companies SWHC and
NPK). B) How did the company perform? C) Were there any notable swings in stock
prices over this period and if so, what can you surmise caused the significant change?
A) In order to gain a “big picture” perspective on the performance of RGR’s stock price,
I’ve included a chart below for side-by-side comparison with other companies in the same
industry.
As seen in the chart above, over the past three years, RGR’s stock price has increased by
35.7%, showing a somewhat steady growth rate in this time span. It seems to have done better
than the overall Dow, as well as growth of NPK, an industry competitor. SWHC’s sales have
also grown at a rate very similar to RGR’s rate. (Answer expanded in part b)
B) The company has definitely performed at an efficient and profitable level, with a 35.7%
stock price increase in the past 3 years. When analyzing the chart above and numbers on the
balance sheet, it is evident that RGR has been growing at a very steady rate, increasing sales,
assets, and net profits all in the last year. When comparing it to other companies in the same
industry, we see similar trend patterns (Especially with SWHC), showing that RGR is in fact,
performing at a profitable standard.
C) There is one major price increase from July 2013 to August 2013, however this is followed
by a downward trend in stock price for a few month period ranging from September 2013 to
November 2013. In July and August 2013, several reports about the success of RGR hit the
market, causing several investors to look deeper into the company, its values and most

6. importantly into its balance sheets. With a steady growth rate during the previous years,
investing in RGR seemed to be a sure fire return. Numerous articles regarding the company’s
success came out during these months, and it was soon labeled a #1 buy on the market mid
august (http://www.google.com/finance). With such a positive media attention, a buying
frenzy industry wide took place; companies such as SWHC and NPK both had positive trends
during this time as well. But with such an increase of attention from the media, criticism
began to surface, not only for Strum, Ruggers and Company, but also for all in the industry.
With events in 2012 like the Aurora, Colorado shooting and Sandy Hook, it seemed simply
immoral to continue to invest in a firearms industry. Several companies including the New
York Times began criticizing investors of the stock, continually calling for gun regulation
from government officials and publishing the number of deaths that took place each month
from firearm possession (http://nocera.blogs.nytimes.com). These articles became known as
the gun report, stirring up controversy in the firearms industry. On Tuesday, November 5,
Sturm, Ruger & Co. RGR announced very solid results for Q3 2013 when the company
reported EPS of $1.44/share and revenue of $170.9 million. These results surpassed EPS
estimates by $0.23/share and revenue estimates by $16 million. With Numbers like these, its
no surprise that investments and stock price again began to grow for [RGR].
7. Compare the Company’s earning performance with the movement in the company’s
stock price over the period when the company made its earnings announcement and
issued its 10K.
This question focuses on the time period between the earnings announcement and the
actual filing of the 10-k. In the case of Strum, Ruger and Company this time span is within
hours. Both the earnings announcement and the 10-k were released on February 27th
.
Therefore for the purposes of this question, I will analyze not the time between the release of
the earnings announcement and the 10-k, but instead analyze the stock price and market
before and after the February release date. At the turn of the year (January 2013), the stock
price hovered around $43 a share. With earnings announcements around the corner, eager
investors awaited 8-k and 10-k reports from RGR. With the results of the announcement and
financial stability and growth shown on the 10-K, its no surprise in this short month the stock
price raised $14 to reach a final total share price at around $57 per share. As stated in the
question above, quarterly and annual reports both exceeding expectations of the company
giving faith to investors to continually support the firearms industry. The release of the 8-k
and 10-k reports therefore had a large-scale positive effect on the market for [RGR], as sales,
profits, and share value continued to grow throughout the year of 2013.
8) Based on your nuts and bolts analysis, what are the future growth and performance
prospects for your company? B) Would you want to invest in this company?
This question can be answered using several different aspects of the company. To
determine future growth, net profit alone will not be enough to dictate outcomes. Multiple
social, political and economic factors all contribute to changing to market and stability of
companies, especially a firearms company in the midst of a population where a majority is
demanding stricter weapon regulation. Looking at the balance sheets alone for [RGR] this
company seems like one that is on a very steady, positive upward trend. The company has
seen growth in the past three years in multiple categories including net profit, revenue, price
per share, and net sales. With a smooth increase in these fields in the past years it seems

7. inevitable the company will continue to grow and perform at a profitable level. While the
company exceeded expectations in the previous 8-k and 10-k, it seems this rate of growth has
stabilized, and the company may no longer exceed expectations (not to say they will not meet
expectations, simply not exceed to the extent previously seen.) However, when looking at the
most recent trends beginning in December of 2013 and January of 2014, we can see a
decrease in stock price. Faith in not only the company, but also the entire firearms industry
has been shaky lately. With a large increase numerous campus shootings, school massacres
and public attacks in 2013, reforms on gun regulation have become a large consensus among
the American population. With government officials highly scrutinized on their gun policy,
new reform is inevitably on the way; possibly reform that could change or effect companies
such as RGR and SWHC. Hundreds of articles questioning gun control have been released in
January of this year alone, possibly a factor in the recent trend in RGR.
B) Would I invest in the company? Well if I had no idea about the product of the company
and only looked at balance sheets and trends in the past years of company growth I would
certainly invest. But knowing that this industry is in the spotlight for regulation, it is relatively
unstable to make an investment in the industry at all. Therefore, I would not invest in the
company.
Full Links Used In Assignment
http://www.google.com/finance?cid=33824
http://nocera.blogs.nytimes.com/2013/09/11/the-gun-report-september-11-
2013/?_php=true&_type=blogs&_r=0
http://www.nasdaq.com/article/sturm-ruger-company-inc-rgr-exdividend-date-scheduled-for-
august-14-2013-cm267019
http://www.ruger.com/corporate/history.html
http://www.google.com/finance?q=NYSE%3ARGR&ei=RVL9UuD6IIKWiQLPlgE
http://seekingalpha.com/article/1818852-even-with-a-dividend-cut-im-still-staying-bullish-on-
shares-of-sturm-ruger-and-co
http://finance.yahoo.com/echarts?s=RGR+Interactive#symbol=rgr;range=20110214,2014021
2;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source
http://quote.morningstar.com/stock-filing/Annual-
Report/2012/12/31/t.aspx?t=XNYS:RGR&ft=10-
K&d=757efa8d493d6eb22f90910b9b770724