Here’s Why Smith & Wesson Holding Corporation (SWHC) Shot Up 5%

In addition, the press release also announced that the company’s board of directors has approved a new $100 million stock-repurchase program, which will replace the $15 million still remaining under Smith & Wesson’s previously approved $35 million repurchase program announced last December.

More specifically under the new plan, $75 million will be repurchased by way of a fixed-price issuer tender offer at $10.00 per share, or around 2% above Friday’s closing price of $9.78 per share. On another encouraging note, Smith & Wesson also indicated that “none of the company’s executive officers or directors will tender any portion of their shares in the tender offer,” so investors can rest assured this isn’t simply a roundabout way for management to cash out.

As for the remaining $25 million, it will either be repurchased in the open market or through privately negotiated deals with shareholders. In all, considering the company’s current stock price and depending on the number of shares ultimately repurchased, this buyback plan could potentially reduce the number of Smith & Wesson shares outstanding by as much as 15%.

Foolish final thoughts
In the end, I can’t blame the folks at Smith & Wesson for wanting to buy back their stock. After all, even after Friday’s pop, it still trades at a mouthwatering 10 times last year’s earnings, and only nine times next year’s estimates. Past weakness or not, Smith & Wesson stock simply looks too cheap to ignore.

The article Here’s Why Smith & Wesson Shot Up 5% originally appeared on Fool.com and is written by Steve Symington.

Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of Sturm, Ruger & Company (NYSE:RGR).

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