Over the full ten-year cycle 2014-2023, Ruger delivered an average return on equity of 30% without recourse to leverage. This remarkable financial performance goes hand in hand with a business that generates good free cash flow, perfectly reconcilable with net income, and entirely returned to shareholders.

Recently down to $600 million, its lowest level in ten years, its enterprise value - market capitalization minus excess cash - represents on paper a valuation of only nine times the average annual free cash flow generated over the cycle.

Admittedly, the arms manufacturer is not growing - its sales in 2023 were exactly the same as in 2014 - and fears of tougher legislation have long hung over the company like a sword of Damocles. Let's face it, though, the subject has been dragging on for thirty years, without any real retaliatory measures; and it clashes with the sacrosanct second article of the US Constitution.

This is precisely what should interest fans of "momentum" investment strategies. The likely victory of the Democratic candidate in the November presidential election could lead to a veritable "gun rush", similar to that seen during the Obama years or at the start of the pandemic.

Gun sales are cyclical, and Ruger, like Smith & Wesson and its peers, benefited from an exceptional sequence of events during the pandemic. The latter led to a profound distortion of results, which may be distorting the averages set out above; hence the market's current pessimism. On this subject, see Smith & Wesson Brands, Inc: The market hits the bull's-eye, published in our columns last year.

Barring a providential rebound, have we reached the bottom of the cycle? At this stage, nothing is less certain: inventories, average selling prices and the number of background checks carried out prior to any gun sale - in the legal circuit - remain far from their lows; in fact, the latter fell by a further 6% in the first six months of 2024.

In its communications to investors, Ruger denies being able to predict a future market rebound. Earlier this year, however, the arms manufacturer launched a share buyback program, and has already delisted 3% of its outstanding shares in the process.