Pittsburgh Tactical Firearm's Facebook Inc (NASDAQ:FB) page was recently closed, and the owner is concerned. He received hundreds of emails and phone calls over the past several days from some of his 27,000 followers, informing and questioning why the page was shut down. While we can't control what happens there, lets look at what kind of role Facebook Inc (NASDAQ:FB) and its policies may have on our investments.
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The numbers show that Facebook Inc (NASDAQ:FB) now has over 1 billion users, and it generated approximately $5.1 billion in 2012 revenues -- more than 37% higher than 2011's revenues. Erik Lowry, the owner of Pittsburgh Tactical Firearms, was running a giveaway contest of an AR-15 when his Facebook page was inexplicably shut down. He didn't know why, but he did open another page which was also shut down. He has asked Facebook Inc (NASDAQ:FB) -- at least 100 times -- for an explanation, but has been left to guess what is going on.
While Facebook Inc (NASDAQ:FB) has not commented on the matter, Lowry has said:
"There are no guidelines that say you can’t give away guns. I still don’t know what’s going on. This kind of censorship is unconstitutional."
Many arguments could be made for either side of this debate. Is it an infringement of rights, or is it a company's right to decide whom it does business with? I will leave that up for others to decide, but what I do know is gun companies are flourishing with all the hype that has evolved in this area over the past few years.
Who might be benefiting the most
Both Sturm, Ruger & Company (NYSE:RGR) and Smith & Wesson Holding Corporation (NASDAQ:SWHC) have gross margins in the 30% range, while Facebook Inc (NASDAQ:FB)'s is 73.2%. This should be expected as Ruger and Smith and Wesson have to build, market, and sell products while Facebook generates most of its revenues from areas like advertisements.
Over the last three years, Facebook Inc (NASDAQ:FB)'s revenues have increased an amazing 258%. Facebook is a fairly new company, and rapid growth is more likely for it than companies that have been in business since 1852, like Smith & Wesson Holding Corporation (NASDAQ:SWHC). Sturm, Ruger & Company (NYSE:RGR) and Smith and Wesson have increased revenues by 93% and 1.5% respectively since 2010.
These companies FCF yields are all very different, but some show better value than others. Again, understand that I am not comparing Facebook, a social media company, to a completely different industry, but I do want to show who, in my opinion, offers a better opportunity.
Facebook Inc (NASDAQ:FB) shows a FCF yield of 0.6% with a market cap of $62 billion. Facebook's P/E is 2,500, but that figure is exaggerated because of its youth and its stock's vulnerability to the media.
Both Sturm, Ruger & Company (NYSE:RGR) and Smith & Wesson Holding Corporation (NASDAQ:SWHC) show cheaper stocks as their FCF yields are 6.5% and 8% respectively. Both of these companies have a market cap that is under the $1 billion mark.Smith and Wesson and Ruger show P/E's of 8.4 and 13.4 respectively. Ruger is the only company here that offers dividends to its shareholders, and its 3.1% dividend is almost a full percentage point better than the industry average.