Data on background checks from the Federal Bureau of Investigation show a 20 percent increase in gun sales so far this year, apparently fueled by gun owners’ concerns that a re-elected President Obama might propose new restrictions on firearms.

Sales of guns and ammunition also tend to spike after the tragic mass shootings that unfortunately have become a regular part of American life. The July 20 killing of 12 people in a crowded cinema in Aurora, Colorado, prompted a 40 percent jump in sales the next day.

Why do people rush to buy guns after such awful incidents? Two reasons, say experts. One is to defend themselves in case they are caught in a shooting; the second, perhaps more important, is that the media coverage generated by these shootings invariably touches on the topic of gun control—spurring more of the preemptive gun purchases that we’ve seen in this election year.

But political considerations don’t fully explain why commercial firearm sales are displaying strong long-term, secular growth. We’re also seeing increasing social acceptance of firearms for both personal defense and recreation/leisure, particularly among women and younger Americans. In general, an increasing number of Americans are choosing to own guns, and more gun owners are adding to their collections. 

These trends bode well for firearm makers Smith & Wesson (NASDAQ: SWHC) and Sturm, Ruger & Company (NYSE: RGR). Both companies have produced record earnings and seen their share prices rise significantly over the past year: a 317 percent gain for Smith & Wesson’s stock price, and a 67 percent increase for Sturm, Ruger’s shares. These price increases scared some analysts into downgrading these stocks in early August based on valuation, but the continuing sales increases and order backlog suggest that gun stocks have more upside in the near future.

For the first quarter of fiscal 2013, Smith & Wesson generated revenue of a record $136 million, up 48.3 percent from the first quarter last year. The increase was led by strong sales of its Military & Police (M&P) product platform.

Gross profit for the first quarter was $51.3 million, or 37.7 percent of net sales, compared with gross profit of $26.5 million, or 28.9 percent of net sales, for the comparable quarter last year. Increased sales volume of polymer firearms boosted gross profit margin, resulting in an improvement in manufacturing absorption.

For the quarter ended July 31, Smith & Wesson earned $17.8 million, or $0.27 a share. That compares with a profit of $791,000, or $0.1 a share, a year ago.

Smith & Wesson recently raised its expected earnings per share (EPS) to $0.85 to $0.90 a share on revenue between $530 million to $540 million. On June 28, the company had forecast EPS of $0.60 to $0.65 on revenue of $485 million to $505 million. As of July 31, 2012, firearm backlog was $392.4 million, an increase of $243.6 million, or 163.7 percent, over the end of the first quarter last year, and a decrease of $46.6 million, or 10.6 percent, from the most recent sequential quarter.

Smith & Wesson has an equity summary score of 9.9 out of 10 for a VERY Bullish outlook. It has a 12-month price target of 12.25.

Sturm, Ruger reported that for the second quarter of 2012, revenue reached $119.6 million and EPS $0.91, compared with revenue of $79.6 million and EPS of $0.56 in the second quarter of 2011.

For the six months ended June 30, 2012, revenue was $231.9 million and EPS $1.71, compared to revenue of $155.1 million and EPS of $0.99 in the same period a year ago.

Sturm, Ruger’s earnings increased 63 percent from the second quarter of 2011, driven by its 50 percent growth in revenue and a focus on continuous improvement in operations. New product introductions were a significant component of revenue growth, as new product sales represented $87.8 million or 38 percent of sales in the first half of 2012.

Sturm, Ruger declared a dividend of $0.377 per share for the second quarter. Effective with the dividend paid in March 2012, the company increased the percent of quarterly earnings paid out as dividends by 67 percent. The dividend is approximately 40 percent of net income.

Sturm, Ruger & Company has an equity summary score of 9.6 out of 10 for a VERY Bullish outlook. It has a 12-month price target of 54.50.

Methodology: Our Equity Summary Score provides a consolidated view of the ratings of 10+ independent research providers. It uses the providers’ relative, historical recommendation performance along with other factors to give you an aggregate, accuracy-weighted indication of the independent research firms’ stock sentiment. The normalized analysts’ recommendations and the accuracy weightings are combined to create a single score. For the largest 1,500 stocks by market capitalization, these scores are then forcibly ranked against all the other scores to create a standardized Equity Summary Score on a scale of 0.1 to 10.0 for the 1,500 stocks.

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Greg Pugh, an income-investing expert, publishes a newsletter called Investing for Monthly Income.