$20.50
$65.85
bear $20.50
base $44.09
bull $65.85
margin of safety $19.00
market price* $43.38
Sturm, Ruger & Company is one of the largest makers of firearms for the US civilian market: pistols, revolvers, rifles and shotguns sold under the Ruger, Marlin and Glenfield names, built in Newport (New Hampshire), Prescott (Arizona), Mayodan (North Carolina), Earth City (Missouri) and Hebron (Kentucky). About 99% of sales are firearms and about 95% are domestic. It sells almost entirely through independent wholesale distributors; three of them, Lipsey's (27%), Sports South (22%) and Davidson's (18%), took two-thirds of 2025 firearms sales. The company has no debt. What drives the business. Demand for civilian firearms swings hard with fear of new gun restrictions and with unrest. Ruger's own record shows the pattern: owner earnings (cash from operations after removing working-capital swings, stock compensation and the capital spending needed to keep the plants running) were $4.97 a share in the 2016 surge, fell to $2.25 by 2019, jumped to $5.86 in 2020 and $9.11 in 2021, then slid every year to $4.57 (2022), $2.82 (2023), $1.59 (2024) and $1.01 (2025). Sales have not grown over the decade ($664M in 2016, $546M in 2025), and the recent slump is worse in margin than in volume: in 2019, on $411M of sales, the business kept about 10 cents of owner earnings per sales dollar; in 2024 and 2025, on $536-546M, it kept 5 and 3 cents. The 2025 annual report attributes this to higher material and technology costs, a shift toward lower-margin models, heavier promotions, a $5.7M sales reduction from closing out 67,000 discontinued guns, and $4.3M of start-up costs at the Hebron plant bought from Anderson Manufacturing in July 2025. Accounting judgements. The 2025 figure adds back a $17.0M non-cash inventory write-off from that product clean-up; the cash for that inventory was spent in earlier years, so the add-back is correct, but it means 2025's $1.01 already flatters the underlying year rather than understating it. Capital spending above what was needed to support sales growth (about 4% of added revenue) is treated as investment, not upkeep; this matters only in growth years (2016, 2020, 2021). The 2020 Marlin and 2025 Anderson asset purchases are treated as acquisitions, not ongoing costs. The earnings level. Over one full cycle, 2017 through 2025 (a trough, the 2020-21 surge and the slide after it), the middle year earned $3.06 a share. We do not use that as today's normal: on more sales than in 2017-19, today's cost structure earns well under half the margin of that earlier trough. We therefore build each case from the current cost base, with surge years drawn from the company's own history. Recent results. Owner earnings fell 36% in 2025. Our base case assumes about $1.20 a share for 2026, up 19%, because the six months to June 2026 already show sales up 12% (second quarter up 19%), an operating profit of $5.7M against a $12.2M loss a year earlier, and roughly $0.70 a share of owner earnings in the half, with the 2025 closeout and Hebron start-up costs not repeating. Base case ($44 a share). Earnings recover gradually from $1.20 to about $2.40 by 2029 as the 2025 costs fall away and new products (33% of 2025 firearms sales came from models launched in the prior two years, a cadence Ruger has kept for many years) hold share. One demand surge of the kind seen in 2013, 2016 and 2020-21 arrives within the decade, worth about $4.50 and $3.50 a share in its two peak years, followed by a destocking dip to $1.60-1.80 like 2023-24. That averages about $2.30 a share a year, which we carry forward with no growth: Ruger has sold guns to American civilians for more than 75 years under one of the best-known names in the trade, and nothing in the filings suggests that ends. The operating business is worth about $38 a share (about $620M); it owes nothing; adding about $97M ($6 a share) of cash and short-term investments beyond a $20M operating cushion (from $117M held at June 27, 2026) gives about $44. Bear case ($20.50 a share). A deeper downturn like 2017-2019, when Ruger's sales fell 38% from peak, hits a business that is already at thin margins: with distributors cutting inventory, owner earnings drop to roughly zero in 2028 and stay near it for two years, then settle at about $1.00 a share, the 2025 level, permanently, with no surge in the decade. Concentration in three distributors makes destocking hit fast. The business is worth about $14.50 a share (about $236M), owes nothing, and holds about $6 a share of surplus cash, for about $20.50. Even this case does not threaten survival: Ruger has no borrowings and positive operating cash flow in every year of the past decade. Bull case ($66 a share). Cost actions and the new-product cadence restore margins toward the 2017-19 level, earnings reach $3.50 by 2028, and a surge as strong as 2020-21 lifts owner earnings to $6-7 a share for two years. The through-cycle level settles at about $3.50, close to the 2016-2025 middle year. The business is worth about $60 a share (about $974M); with no debt and about $6 a share of surplus cash, about $66. What was left out. No value is given to Beretta Holding's accumulated stake or any bid it may make; the board adopted a shareholder rights plan in response, and an offer is not something we can price. No growth from market expansion, share gains or acquisitions is credited. Our previous figures for Ruger were prepared on a different basis and are not comparable. What could make this wrong. The base case leans on one demand surge in ten years; the record supports that, but timing is political and cannot be known. More important is whether the margin loss since 2021 is cyclical (promotions and under-used plants) or permanent (costs that cannot be passed on). If permanent and no surge comes, the shares are worth roughly the bear figure. A sustained recovery in quarterly operating margins would argue the other way. Margin-of-safety price ($19). How sure are we of the earnings level? Not very: it has ranged from $1.01 to $9.11 a share in ten years, and today's cost base has not been tested in a surge. The worst plausible outcome, years of weak demand with margins stuck near 2025 levels, the loss of a major distributor, or new state or federal restrictions on popular models, would hurt earnings but not threaten the company, because it has no debt and about $7 a share of cash and investments. If we are wrong about the surge and the margin recovery, the shares are worth about $20. A surge could take four to five years to arrive, and in the meantime the business pays out a variable dividend (about $0.62 a share in 2025) and repurchases stock. At $19 the price implies about $13 a share for an operating business that earned $1.01 in its worst year in a decade and averages more than twice that over a cycle, with the bear outcome roughly equal to the price and a single surge of the kind the company has repeatedly seen doubling the value of the shares within a few years. The price assumes a holding period of up to four to five years, and from that price the base case implies about 20% a year without needing everything to go right.