Evaluating Axon Stock After Recent 15% Drop and Rapid Five Year Growth

If you have Axon Enterprise stock on your watchlist or already in your portfolio, you have definitely noticed the dramatic swings lately. Over just the last month, Axon dropped 15.2%, and in the past week alone, it slid another 11.3%. It's enough volatility to make anyone question whether the recent excitement has fizzled out or if it's just resetting before another surge. But zoom out a bit, and the bigger picture tells a different story: Axon's shares have soared 8.1% since the start of the year and a staggering 48.7% over the last year. The real jaw-dropper? The stock is up more than 500% in the past five years, rewarding long-term believers in a big way.

Much of that momentum has come from confident bets on Axon’s position at the intersection of technology and public safety, plus some tailwinds from broad market optimism. That said, when stocks climb this fast, valuation gets trickier, and it is absolutely fair to wonder whether the shares are still a smart buy at $644.99. Right now, Axon’s valuation score sits at just 1 out of 6, meaning it currently screens as undervalued in only one metric and perhaps looks pricey by most traditional measures.

So, how should we really think about Axon's worth? The next section will unpack the numbers behind those valuation methods, helping you make sense of what the score means. Stay tuned for the end, where we’ll discuss a smarter way to judge value beyond the usual formulas.

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

The Discounted Cash Flow (DCF) model projects a company’s expected future cash flows and then discounts each year’s figures back to today’s dollars to estimate what the business is truly worth right now. This approach focuses on how much cash the company can generate for its owners over time.

For Axon Enterprise, the most recent reported Free Cash Flow (FCF) is $184 million. Analysts expect this figure to increase over the coming years, with projections reaching $889 million by 2027. Because detailed analyst estimates only extend about five years ahead, further growth projections out to 2035 are extrapolated using reasonable assumptions, showing FCF reaching close to $1.9 billion in the long term.

Using these cash flow expectations, the DCF model currently calculates Axon's intrinsic value at $365.21 per share. With shares recently trading around $645, the DCF suggests the stock is trading at a 76.6% premium to its fair value based on these long-term cash flow projections. In short, this signals the shares appear overvalued when judged by this method.

Result: OVERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Axon Enterprise may be overvalued by 76.6%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Axon Enterprise Price vs Sales

The Price-to-Sales (P/S) ratio is a useful yardstick for valuing profitable, fast-growing companies like Axon Enterprise. Unlike some other metrics, the P/S ratio makes it easy to compare companies regardless of the swings in their reported profits from year to year, especially when high growth and reinvestment are in play. Generally, the higher the company’s expected growth and profitability, and the lower its risks, the higher a “normal” or “fair” P/S multiple investors might be willing to pay.

Axon Enterprise is currently trading at a P/S ratio of 21.2x. For context, its Aerospace and Defense industry peers are priced at roughly 3.1x, and the selected peer group averages about 7.7x. Clearly, Axon's multiple is much higher than both benchmarks, signaling that investors are willing to pay a premium for its growth story and future potential.

To help make sense of whether that premium is deserved, Simply Wall St calculates a proprietary "Fair Ratio" for the company. This number, 16.1x for Axon, accounts for a range of factors like expected growth, profit margins, market cap, and the unique risks and advantages of Axon's business. Compared to just looking at peers or the broader industry, the Fair Ratio offers a much “truer” benchmark for the company’s actual prospects and challenges.

Sizing up Axon’s current P/S of 21.2x against its Fair Ratio of 16.1x, the shares are trading well above what would typically be justified by its growth and profitability outlook, even allowing for a premium.

Result: OVERVALUED

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

Upgrade Your Decision Making: Choose your Axon Enterprise Narrative

Earlier we mentioned there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your own story about a company like Axon Enterprise. It is the concrete connection between what you believe about the business, your future forecasts for revenue, margins, and growth, and the fair value you assign as a result. With Narratives, you’re not just crunching numbers. You’re blending the company’s story and competitive landscape into your financial outlook, and then into a price you think makes sense.

Narratives are available on Simply Wall St’s Community page, used by millions of investors, and are accessible and easy to update whenever the facts change, whether it is new earnings, news, or shifts in the market. Instead of relying solely on static ratios, Narratives guide you to clear decisions: if your Fair Value is higher than today’s share price, it may be a buy; if it is lower, it may be time to wait or sell.

For example, investors looking at Axon’s rapid global adoption and next-gen product launches might create an “optimistic” Narrative that values the stock as high as $1,000 per share. Those who are more cautious and focus on regulatory risks and margin pressures might build a Narrative with a Fair Value closer to $800.

Do you think there's more to the story for Axon Enterprise? Create your own Narrative to let the Community know!

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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