Make no mistake. AMMO, Inc. (Nasdaq: POWW, POWWP) is considerably undervalued. In fact, factoring in guidance to do $55 million this quarter and expectations to reach $400 million by 2024, by any metric, AMMO stock is a gift at these levels. Better still, while its guidance is decidedly bullish, it's important to note that its $400 million expectation is just the next step in its evolution. During its last conference call, the CEO said that AMMO will grow into a top-five ammunition company with a billion in revenues in its crosshairs. There's every reason to believe it will happen.

In fact, updates during September alone should have pushed AMMO well above its roughly $700 million market cap. However, while investors may have missed the memo on the milestones reached, the benefit is that it keeps this value proposition in play. And from a trader's perspective, the window of opportunity won't last much longer.

Frankly, savvy investors need to be acting on the value proposition now, with the understanding that the company is but a single press release away from surging higher. No joke. Despite investors overlooking its revised higher guidance of $55 million for the quarter and a military contract that could be worth hundreds of millions, other revenue-generating updates are also in the queue. That means investors haven't missed the boat. To put it another way, there's still time to back up the truck.

And there's a number of reasons for why.

A Guided Surge In Revenues

Foremost, this vertically integrated producer of high-performance ammunition and components announced increasing its prior fiscal second-quarter revenue to approximately $55 million for the period ending September 30, 2021. That's about 9% higher from where it was initially. It's also substantially more percentage-wise than what sends other growth stocks soaring. Tech companies, like Apple (NASDAQ: AAPL), for instance, can jump 10% in value by beating estimates by a mere 1%. AMMO should get the same respect.

Perhaps, even more, noting that it has not yet fully integrated its $190 million acquisition of GunBroker.com, the largest online marketplace serving the firearms and shooting sports industries. Revenue-generating opportunities from that six million member base alone can send revenues significantly higher. And it very well may.

A clue to that playing out came from the company, which said its transaction activity at GunBroker.com remains robust, even compared to last year's record-setting performance. Further, they were more bullish, saying that investors should not overlook the value from its implementing several initiatives intending to accelerate the growth, including engaging with manufacturers, distributors, and importers to expand the marketplace offerings. And with a record of speaking the truth and delivering on promises, it may be wise to follow that guidance.

Better still, they have the capital and means to back up their optimistic guidance.

Seizing Upon Demand

And that's the best part. AMMO can be trusted. Hence, when AMMO says that growth in its core ammunition business continues to be driven by strong underlying demand for its unique, high-performance products, for investors, it means "higher revenues."

And since consolidating all manufacturing operations this past April in its Manitowoc, Wisconsin plant, AMMO now has the capability to at least double its priming and loading capacity, as well as increasing its brass manufacturing capacity by approximately 15%. That's not all. There are additional production enhancements planned for operational deployment in the near term. The good news there, AMMO can meet the massive demand.

And that's on the consumer and government sector side. Potentially transformational product orders can come from the military, similar to its September announcement of being awarded a contract from the Irregular Warfare Technical Support Directorate (IWTSD), operating under the U.S. Department of Defense. That order is for AMMO to design and manufacture signature-on-target rounds (SoT) to support U.S. military operations. For obvious reasons, the size of these contracts is often kept from the public to not tip the government's hand on military weaponry. That's understandable.

Also understandable to those that follow the sector and similar contracts know that the value of these contracts can quickly add up into the billions of dollars. Better still, it's unlikely that super-specialized ammunition, like AMMO is developing, can be bid on by other suppliers. In fact, mixing and matching artillery isn't the most common practice for DoD contracts.

Quickly, the product deserves attention. It's indeed a dynamic product being developed to provide warfighters with the ability to see the impact of rounds fired from their weapon systems on a wider variety of targets, both day and night. The specialized SoT ammunition also allows the machine gunner to see bullet impacts without a visible signature in-flight to expose their firing location. For U.S. troops, the state-of-the-art ammo can be a life-saver.

Better yet, its advanced capability will increase survivability by reducing firing position identification and ultimately increasing lethality by supporting the shooter to place more rounds on target. In short, it's a product development and supply program that should have already sent valuations soaring. Still, it's only one part of the value proposition.

But it does show that AMMO, Inc. is more than just guns and bullets.

Optimism Abounds In 2021-22

Another value driver in plain sight is AMMO's reported $238 million order backlog expected to turn into cash later this year. And its enhanced manufacturing facility expected to increase capacity by nearly 4X should have no problem winding down that backlog. But, with demand raging, the excellent news is that it will likely be replenished with new orders.

Thus, with at least $238 million in booked revenue visibility staring analysts down, expect some favorable coverage to come soon. After all, not accounting for that revenue is a bit too conservative. True, that revenue can't be recorded under GAAP rules, but the back of the napkin valuations can certainly price in that value. Notably, the backlog alone with an industry peer multiple could have the stock nearly 2X higher than existing prices. But, it wouldn't be right to not account for the millions of more dollars making it through the sales channel.

There's more excellent news there, too. This time the laws of supply and demand should take over, with AMMO again getting the better end of the deal. And those laws should benefit AMMO even more after a Department of State order went into effect limiting all ammo-related imports from Russia. By the way, the DoS is doing more than limiting the imports; it has prohibited them entirely for at least the next 12-months. Thus, while the consumer gets squeezed, AMMO instead gets a revenue-generating tailwind.

Still, we haven't gotten to the best part, the value that comes through the revenue-generating strength and potential from GunBroker.com. Clues were again provided by AMMO management, who said during its earnings call that a fully integrated GunBroker can be a massive contributor to new revenues. They noted that only about $12 million of high-margin marketplace revenue came through its Gunbroker.com acquisition last quarter. Expectations are for that number to surge in coming quarters.

That makes sense, especially after noting that the millions of active users at Gunbroker.com only contributed about 3% of its revenues from gun and ammunition sales. Part of that was not having a supplier at its side. Now, that's changed. Hence, AMMO inherits an enormous revenue-generating opportunity from that group alone.

And with a report in G.Q. Magazine indicating that the average gun owner spends roughly $250 per year on ammo, training, and supplies, tapping into even a tiny percentage of that six-million-member group could deliver an exponential surge in revenues. Expect AMMO to seize upon that direct marketing opportunity.

Justify The Surge

Then, factor in that its new facility is designed to quadruple production to meet demand from its presence in more than 1600 direct-to-consumer locations. Combined, the sum of its parts validates AMMO's bullish posture.

Further, despite its small-cap price, those parts also demonstrate that AMMO is in the big leagues as an ammunition and munitions company. Keep in mind, they already expect to sell upwards of 750 million rounds of ammunition this year. And that's not including its newly awarded military contract that could exponentially increase those totals.

Better yet, as AMMO continues to integrate its Gunbroker.com asset, it can leverage being in its best position ever to capitalize on the combined $32 billion in sales opportunities from its core target markets. One more thing- AMMO, Inc. is American-owned and American-made. Hence, what's not to like about this company.In fact, with record sales, highest ever profits, and a backlog approaching $240 million, it's challenging to find a single fault with the company. Thus, for AMMO stock to be trading at anything less than 52-week highs of $10.31 is more than a valuation disconnect; it's an opportunity. But, as noted earlier, markets can and do correct quickly, and this gap between intrinsic value and market cap is likely to soon close. Earnings next month will likely start the action. Thus trading ahead of the report may be a wise consideration

The bottom line- keep AMMO, Inc.'s stock in the crosshairs. Better still, consider pulling the trigger on an investment in AMMO that could provide potentially significant near and long-term gains. It's likely the better choice of the two.

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