With a daily gain of 2.91% and a 3-month gain of 9.29%, Axon Enterprise Inc (AXON, Financial) has been drawing attention from value investors. The company's Earnings Per Share (EPS) stands at 1.34. But the question remains: is the stock fairly valued? As we delve into the valuation analysis, we encourage readers to follow along for an in-depth understanding of Axon Enterprise's true worth.
Introducing Axon Enterprise
Axon Enterprise Inc is a leading player in the development, manufacturing, and selling of conducted energy devices and cloud-based digital evidence management software. Primarily catering to law enforcement, corrections, military forces, and private security personnel, the company operates in two segments: Taser and software & sensors. With most of its revenue coming from the United States, Axon Enterprise's current stock price stands at $211.1, close to its GF Value of $222.27.
Understanding the GF Value
The GF Value is GuruFocus' proprietary measure of a stock's intrinsic value. The GF Value Line provides an estimate of the ideal fair trading value of a stock, considering historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. If the stock price is significantly above the GF Value Line, the stock is likely 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.
Given this, Axon Enterprise (AXON, Financial) appears to be fairly valued. The GF Value estimates the stock's fair value based on three key factors: historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. At its current price of $211.1 per share, Axon Enterprise stock appears to be fairly valued. Thus, the long-term return of Axon Enterprise's stock is likely to be close to the rate of its business growth.
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Financial Strength of Axon Enterprise
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Hence, it is crucial to review the financial strength of a company before deciding to buy its stock. Axon Enterprise's cash-to-debt ratio of 1.6 is better than 62.28% of 289 companies in the Aerospace & Defense industry. GuruFocus ranks the overall financial strength of Axon Enterprise at 7 out of 10, indicating that its financial strength is fair.
Profitability and Growth of Axon Enterprise
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Axon Enterprise has been profitable 8 years over the past 10 years. The company had revenues of $1.40 billion and Earnings Per Share (EPS) of $1.34 in the past 12 months. Its operating margin of 8.17% is better than 59.36% of 283 companies in the Aerospace & Defense industry. GuruFocus ranks Axon Enterprise's profitability as fair.
Growth is a crucial factor in the valuation of a company. The 3-year average annual revenue growth rate of Axon Enterprise is 22.9%, which ranks better than 87.36% of 261 companies in the Aerospace & Defense industry. The 3-year average EBITDA growth rate is 169.4%, which ranks better than 99.56% of 227 companies in the Aerospace & Defense industry.
ROIC vs WACC
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Axon Enterprise's ROIC is 8.06 while its WACC came in at 10.95.
Conclusion
Overall, Axon Enterprise (AXON, Financial) stock 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 227 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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