AMMO, Inc. (Nasdaq: POWW, POWWP) could be one of the best-kept secrets in the market. Actually, they're not entirely under the radar since they have a more than $700 million market cap. But, it should be higher, especially after several recent updates shows that POWW is growing at warp-speed.

In fact, several updates in September alone should have generated a firestorm of interest. But, since it didn't, investors still have an opportunity to catch POWW stock at considerably undervalued prices. This may be an aggressive presumption, but once investors truly understand the story at AMMO, Inc., current prices could become extinct. And deservedly so.

Frankly, AMMO stock is already deserving of a considerably higher market cap. And if AMMO was magically set at a billion-dollar cap, it may not do enough valuation justice. After all, they have the assets, sales, and pipeline to justify that 30% move higher. Better still, recent updates show they have the fuel needed to accelerate well past that ambitious target.

Last week, this leading vertically integrated producer of high-performance ammunition and components announced increasing its prior fiscal second-quarter revenue estimate from $51 million to approximately $55 million for the period ending September 30, 2021. And as the owner and operator of GunBroker.com, the largest online marketplace serving the firearms and shooting sports industries, that estimate may prove to be conservative.

A clue to that scenario comes from the company, which said its transaction activity at its marketplace platform, GunBroker.com, remains more robust, even compared to last year's record-setting performance. Further, they made sure that investors knew to factor in its implementing several initiatives intending to accelerate the growth, including engaging with manufacturers, distributors, and importers to expand the marketplace offerings.

Growth By Meeting Massive Demand

But that's not all. Its CEO also noted that the growth in its core ammunition business continues to be driven by strong underlying demand for its unique, high-performance products, coupled with ongoing efforts to increase capacity. Notably, since consolidating all manufacturing operations this past April in its Manitowoc, Wisconsin plant, AMMO said it has doubled its priming and loading capacity and increased its brass manufacturing capacity by approximately 15%. And there are more production enhancements planned for operational deployment in the near term. Still, AMMO said to expect even more in the coming quarters.

Part of that optimism could come from its military contracts. In September, AMMO announced being awarded a contract from the Irregular Warfare Technical Support Directorate (IWTSD), formerly CTTSO, which is formed and operating under the U.S. Department of Defense, to design and manufacture signature-on-target rounds (SoT) in support of U.S. military operations.

Of course, the size of the contract is sensitive information, and understandably so. But, those that follow similar deals know that dollar amounts can range from hundreds of thousands to hundreds of millions of dollars. In fact, billion-dollar contracts in ammunition orders are not uncommon. And while AMMO couldn't provide specific details, it's a fair assumption that it will be a moneymaker due to the product's specialized nature.

It's indeed a dynamic product. According to AMMO, the SoT ammunition is 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 further 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. 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. Moreover, from a competitive perspective, AMMO remains well-positioned to capitalize on future orders. Remember, this type of ammunition is highly specialized, with only a tiny handful of companies able to produce it. Thus, it's one big reason why this $6.12 stock could have a tremendous amount of value left on the table.

Optimism Abounds

The company sure thinks so. In its last conference call, AMMO said that while its expected $200 million or more in revenues this year is a great accomplishment, they see business ramping toward the $400 million levels based on existing trends. They can see behind the curtain.

Moreover, with a new Department of State (DOS) policy intending to prohibit the importation of both firearms and ammunition from Russia, the opportunities inherent to its Gunbroker.com asset, with its six million active users, could add substantially to revenues as the integration process continues.

In addition, its massive $238 million order backlog reported at the end of last quarter will also turn into cash, especially through its enhanced manufacturing facility expected to increase capacity by nearly 4X. Not only does it transform a backlog into revenues, but it also leaves plenty of production room to spare.

And, remember, the American gun markets already suffer from demand exceeding the available supply. Store shelves across the country are bare, with both Big Box and small retail struggling for inventory. Sector analysts don't expect demand to lessen anytime soon either. They see the move by the DOS doing two things- exacerbate the current supply problems and strengthen an already booming market. Sometimes the government itself can be the most successful gun salesman. In the current environment, they may very well be.

Record-Setting Momentum In Place

Moreover, the expected surge in demand to an already booming market is more than good news from a sales perspective. Laws of supply and demand should lead to higher prices, more substantial gross margins, and extended sales visibility for AMMO. Even better, with the DOS order expected to remain effective for at least 12-months, AMMO can see these potential benefits within the next few weeks and should last at least for the next four quarters.

Hence, despite AMMO raising its revenue guidance significantly, changes to the playing field may put another revision in play. Based on the market conditions, expect any modification to be toward the upside. And if details somehow emerge about the size of its military contract, it can be a substantial change.

Investors need to also value the revenue-generating strength and potential from GunBroker.com. Comments made during its earnings call gave every indication that the GunBroker asset will be a substantial revenue driver. They support their optimistic posture by being intimate with the markets on the ground and knowing that its Gunbroker.com asset has far more to contribute once fully integrated. 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 noting despite the massive active user base at Gunbroker.com, ammunition sales accounted for only 3% of its revenues last year. Hence, AMMO inherits an enormous revenue-generating opportunity from that group alone. Even better, with G.Q. Magazine reporting that the average gun owner spends roughly $250 per year on ammo, training, and supplies, tapping into even a small percentage of that six-million-member group could deliver an exponential surge in revenues.

Then, factor in that its new facility can potentially quadruple production to meet demand from its presence in more than 1600 direct-to-consumer locations, it's almost futile to argue against AMMO's bullish posture. As if that wasn't enough to expose the value proposition, the near-unprecedented levels of new gun permits should strengthen an already strong business tailwind into the next few quarters.

And keep in mind, while AMMO may have a small-cap price, it's no small company. AMMO expects 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, the company is in its best position ever to capitalize on the $32 billion in sales available from its core target markets. Hence, what's not to like about AMMO, Inc.

They have record sales, the highest ever profits, and a backlog that is near $240 million. For them to be trading at anything less than 52-week highs of $10.31 is, therefore, an opportunity. However, as markets can do, they correct quickly. And once investors digest the growth happening at AMMO, Inc., the gap between current and all-time highs could close. Its next update alone may inspire that rally.

Keep this stock in the crosshairs. Better yet, consider pulling the trigger on what could be a massive near and long-term investment opportunity.

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