Smith And Wesson Holdings: Ready, Aim, Fire

Introduction

In this article I’ll have a closer look at Smith and Wesson Holdings (SWHC) which is without a doubt one of the world’s largest and most respected weapons manufacturer. As the company has just released its quarterly results, I will provide my view on the company’s financial statements and its balance sheet. I will also briefly discuss its outlook, which will result in my investment thesis at the end of this article.

My view on the financial results

In the second quarter of financial year 2014 (Smith and Wesson’s financial year starts in May and ends in April), the company reported a total revenue of $139.3M which is a 2% increase compared to the same period last year. But it’s remarkable to see that Smith and Wesson was able to reduce its cost of sales by an astonishing 7.5% to ‘just’ $81.4M. The combination of both factors caused the gross profit to increase by a stunning 19% to $57.9M. Unfortunately this impressive increase was almost neutralized by a 60% increase in general and administrative costs, which caused the operating income to increase by just 8%.

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