With a daily gain of 3.48%, a 3-month gain of 3.24%, and an Earnings Per Share (EPS) of 1.34, Axon Enterprise Inc (AXON, Financial) has caught the attention of many investors. But is the stock fairly valued? This analysis aims to answer that question by delving into the company's valuation, financial strength, profitability, and growth.
A Brief Overview of Axon Enterprise Inc (AXON, Financial)
Axon Enterprise Inc develops, manufactures, and sells conducted energy devices and cloud-based digital evidence management software. These solutions are designed for use by law enforcement, corrections, military forces, private security personnel, and private individuals for personal defense. Axon Enterprise operates in two segments: Taser and software & sensors, delivering its products worldwide with most of its revenue from the United States.
As of August 13, 2023, Axon Enterprise's stock price stands at $211.23, with a market cap of $15.80 billion. The company's GF Value, an estimate of fair value, is $220.27, suggesting that the stock might be fairly valued.
Understanding the GF Value of Axon Enterprise (AXON, Financial)
The GF Value is a proprietary measure that estimates the intrinsic value of a stock. This measure is based on historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally trade.
According to GuruFocus Value calculation, Axon Enterprise (AXON, Financial) appears to be fairly valued. If the stock price is significantly above the GF Value Line, it is considered overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $211.23 per share, Axon Enterprise's stock seems fairly valued.
Given that Axon Enterprise is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength of Axon Enterprise
Before investing in a company, it's crucial to assess its financial strength. Companies with poor financial health pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage are great ways to gauge a company's financial strength. Axon Enterprise's cash-to-debt ratio is 1.6, which is better than 63.18% of companies in the Aerospace & Defense industry. The overall financial strength of Axon Enterprise is 7 out of 10, indicating that it is fair.
Profitability and Growth of Axon Enterprise
Investing in profitable companies carries less risk, especially if they have demonstrated consistent profitability over the long term. Axon Enterprise has been profitable 8 years over the past 10 years. During the past 12 months, the company had revenues of $1.40 billion and Earnings Per Share (EPS) of $1.34. Its operating margin of 8.17% is better than 59.51% of companies in the Aerospace & Defense industry. Overall, GuruFocus ranks Axon Enterprise's profitability as fair.
Growth is a crucial factor in the valuation of a company. According to GuruFocus research, long-term stock performance is closely correlated with growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Axon Enterprise is 22.9%, which ranks better than 87.4% of companies in the Aerospace & Defense industry. The 3-year average EBITDA growth is 169.4%, which ranks better than 99.56% of companies in the Aerospace & Defense industry.
Comparing ROIC and WACC of Axon Enterprise
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Axon Enterprise's ROIC was 8.06, while its WACC came in at 10.98.
Conclusion
In summary, the stock of Axon Enterprise (AXON, Financial) appears to be fairly valued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 99.56% of companies in the Aerospace & Defense industry. To learn more about Axon Enterprise stock, you can check out its 30-Year Financials here.
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