Assessing Axon After Contracts Boost and a 27% Monthly Share Price Drop

• If you’ve found yourself asking whether Axon Enterprise’s stock is a buy right now, you’re not alone. It’s a question that deserves more than just a glance at the latest price.
• Axon's share price has seen its fair share of action, climbing 0.8% in the last week, but sliding 27.2% over the past month and ending up 10.6% lower so far this year. The big picture still shows massive gains of over 214% in three years and an impressive 324% in five years.
• Lately, Axon has made headlines for its growing contracts with law enforcement agencies and moves to expand its technology platform, giving bullish investors more to get excited about. At the same time, broader market volatility and shifting attitudes toward tech-driven public safety solutions may be fueling some of the recent price swings.
• When we run Axon Enterprise through our valuation checks, it scores just 1 out of 6 for undervaluation. Let’s explore what this means by looking at the most common valuation methods. Stay tuned, because we’ll also reveal a smarter way to bring it all together at the end.

Axon Enterprise scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Axon Enterprise Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company’s value by forecasting its future free cash flows and then discounting those projections back to today’s dollars. This helps investors gauge what the company is worth based on the cash it is expected to generate in the years ahead.

For Axon Enterprise, the most recent twelve months of Free Cash Flow (FCF) came in at $147.7 million. Analysts expect strong growth over the next several years, with projections reaching $841.9 million by the end of 2027. While analyst estimates only extend five years into the future, further cash flow increases, estimated to top $1.9 billion by 2034, come from extrapolations designed to reflect a reasonable growth trend.

Using a 2 Stage Free Cash Flow to Equity model, the estimated intrinsic value for Axon Enterprise lands at $383.57 per share. This is roughly 39% above the company's current share price, indicating the stock is considered 39% overvalued by this measure.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Axon Enterprise may be overvalued by 39.0%. Discover 923 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Axon Enterprise.

Approach 2: Axon Enterprise Price vs Sales

For companies like Axon Enterprise, which are posting consistent top-line growth and expanding into new markets, the Price-to-Sales (PS) ratio is a widely used valuation tool. The PS ratio helps investors gauge how much they are paying for each dollar of revenue. This is a particularly useful metric for evaluating firms that may be reinvesting profits to fuel future expansion.

It is important to note that growth expectations and business risk can significantly influence what is considered a "fair" PS multiple. Companies with higher expected sales growth or lower risk profiles typically command higher PS ratios, while slower-growing or riskier firms deserve a discount.

Currently, Axon's PS ratio sits at 16.4x, which is noticeably higher than both the industry average of 2.9x and its direct peer average of 15.0x. On the surface, this suggests the stock is richly valued compared with most industry alternatives.

This is where Simply Wall St’s proprietary Fair Ratio comes into play. The Fair Ratio for Axon, calculated at 14.3x, sets a more tailored benchmark by factoring in Axon’s growth outlook, margins, risk profile, industry and market capitalization. Unlike broad industry or peer averages, the Fair Ratio offers a clearer picture of what investors might reasonably expect to pay for a business with Axon’s unique qualities.

Since Axon’s actual PS multiple of 16.4x is only modestly higher than its Fair Ratio of 14.3x, the stock appears to be just slightly overvalued on this measure.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1444 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Axon Enterprise Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply your story about a company, the reasoning and expectations you bring together to form your investment view, such as what you believe Axon’s future revenue, earnings, and profit margins will look like, and what fair value that implies.

Narratives link a company’s story, including its business opportunities and challenges, to specific financial forecasts and a target value. This process transforms raw numbers into decisions you can act on. On Simply Wall St’s Community page, millions of investors use Narratives to capture their unique take on a company’s prospects in an approachable and transparent way.

This tool helps you decide when to buy or sell, as your Narrative’s fair value is instantly compared to the market price and it automatically updates as new information, like earnings or news, becomes available. For example, when looking at Axon Enterprise, some investors believe rapid AI and product expansion will support earnings that justify a price target as high as $1,000, while others worry about regulatory risks and competition and set their target around $800.

Do you think there's more to the story for Axon Enterprise? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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