With a daily gain of 16.27% and a 3-month loss of 8.39%, Axon Enterprise Inc (AXON, Financial) has been making waves in the financial market. The company's Earnings Per Share (EPS) stands at 1.89. But is the stock fairly valued? This article aims to answer this question by providing a detailed valuation analysis of Axon Enterprise Inc (AXON). So, let's dive in.
About Axon Enterprise
Axon Enterprise Inc develops, manufactures, and sells conducted energy devices and cloud-based digital evidence management software. These products are designed for use by law enforcement, corrections, military forces, private security personnel, and private individuals for personal defense. The company operates in two segments: Taser and software & sensors. Axon delivers its products worldwide and gets most of its revenue from the United States.
With a current price of $204.33 per share and a market cap of $15.10 billion, Axon Enterprise's stock seems to be fairly valued when compared with its GF Value of $216.51.
Understanding the GF Value
The GF Value is a unique measure that provides an estimation of the intrinsic value of a stock. The GF Value is computed based on historical trading multiples, a GuruFocus adjustment factor based on past performance 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 be traded. If the price of a stock is significantly above the GF Value Line, it is 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.
According to GuruFocus Value calculation, Axon Enterprise (AXON, Financial) appears to be fairly valued. This suggests that 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
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are great ways to understand its financial strength. Axon Enterprise has a cash-to-debt ratio of 1.54, which ranks better than 63.05% of companies in the Aerospace & Defense industry. The overall financial strength of Axon Enterprise is 7 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Axon Enterprise has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $1.30 billion and Earnings Per Share (EPS) of $1.89. Its operating margin is 7.26%, which ranks better than 55.63% of companies in the Aerospace & Defense industry. Overall, the profitability of Axon Enterprise is ranked 7 out of 10, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. Axon Enterprise's 3-year average revenue growth rate is better than 87.36% of companies in the Aerospace & Defense industry. Axon Enterprise's 3-year average EBITDA growth rate is 169.4%, which ranks better than 99.56% of companies in the Aerospace & Defense industry.
ROIC Vs 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. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Axon Enterprise's return on invested capital is 5.15, and its cost of capital is 10.8.
Conclusion
Overall, Axon Enterprise (AXON, Financial) stock shows every sign of being 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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