Each method has its pro's and con's.
Hand stitching is indeed stronger and more wear resistant. If the sheath your making is intended for hard use then a saddle stitch is the strongest type out there. A stitch can get cut and the line will not unravel if the stitch is done properly. I treat my sheaths awfully, grinding around under the truck and car at oil changes and constantly under my truck for the never ending maintenance that older trucks demand. Outdoors use is dependent on how and what the conditions are, if your digging through that bramble looking for the hog you just shot and he shot into that mess then your going to tear up a jacket or two and other things on you are going to get dinged.
Machine stitching is very nice in and of itself. Lot more consistent in both looks and length of stitch. So much easier if you need to remove the stitching for replacement, cut a few stitches and start unraveling, my daughter can undo a machine stitched sheath in less than 5 minutes. I've unstitched a few hand stitched sheaths and its a nightmare to get them out. A proper machine (saddle stitcher) is fantastic at delivering nice, very tight, and very professional looking sheaths, no doubt almost always looks better than a comparable sheath that is hand stitched. Its also soooo much quicker, but for the maker a machine is another step that is eventually necessary as hand stitching to some is not possible because of arthritis and other ailments. I will be completely reliant on a machine eventually as my family has a strong tendency toward arthritis. My grandmothers hands looked like claws.
The awl stitcher combo above is a lock stitch type tool and produces the same stitching as a machine.
PS edit to add, I and a few of my customers have done a lot of testing between the two stitching types. All of us are incredibly hard on our equipment and not very tolerant of failure in such. I hand stitched exclusively for over 12 years, it honestly took a lot of thinking before I got my first machine. I was working with a couple of vendors that wanted product very fast so I bucked up and bought that machine under a lot of doubt if it could live up to my no nonsense view of sheath making. In short I still do a lot more hand stitching by customer request, I relegate the machine to my inexpensive line of semi production sheaths (that is when its working right) Most of my custom designs just plain wont work on a machine either. Since both those vendors went south, I am left with no one to work semi production for and now staring at this dusty machine wondering what the heck was I thinking, aside from that day when I cant hand stitch anymore.