Is Axon a Publicly Traded Company?

Axon Enterprise (NASDAQ:AXON) specializes in technology for police departments and public safety applications.

The popularity of its products led some to wonder is Axon publicly traded? The short answer is Axon is publicly traded and has handily beaten the market over the last several years.

In the past half-decade, shares in the company have risen by a total of over 355% but can Axon keep up this remarkable run, and is now the time for investors to buy?

What Does Axon Do?

Axon is a manufacturer of public safety equipment for police departments. The company is by far best known as the maker of the TASER, an electric stun gun used by police as a non-lethal alternative to firearms.

However, Axon offers a large product catalog that includes everything from policy body cameras to smartphone applications for remote evidence collection and management.

Needless to say, Axon’s business ties it directly to law enforcement spending. As of 2021, state and local governments in the United States spent $135 billion on their cumulative policing budgets.

A substantial share of this goes to equipment for police. With police reform efforts continuing to focus on non-lethal force initiatives and monitoring of officer interactions via cameras and other safeguards, it’s likely that Axon is in a good position to capture a sizable amount of market share in the coming years.

Axon’s Compelling Growth Story

One of the most appealing aspects of Axon is the fact that the company has been able to raise its revenues rapidly over a long period of time.

With the singular exception of Q4 of 2021, in which revenues contracted by just 3.5%, Axon has delivered double-digit year-over-year revenue growth in every quarter since 2012.

Since the beginning of 2022, the lowest year-over-year quarterly revenue growth rate the company has reported was 28.6%. In Q1 of this year, revenues rose 34% year-over-year to $461 million.

Net incomes have been less reliable over the long haul, but Axon seems to be in a decent earnings growth cycle at the moment.

Following a period of losses in 2020 and 2021, the company has been building its net income at a fairly fast pace. On a trailing 12-month basis, Axon has earned $261 million on revenues of $1.68 billion, a record high for the company.

Axon’s net margins have also reached a historical high point, suggesting that the company can reliably capitalize on its future revenue growth.

In the early 2010s, Axon went through a period of consistently reporting low double-digit net margins. Beginning in 2016, though, those margins contracted into single-digit territory before eventually turning negative in 2020 and 2021. Today, however, the company’s trailing 12-month net margin stands at a record of 15.6%.

Even better for investors is the fact that this streak of strong performance is expected to continue. Analysts project forward 12-month revenue growth of 26.4% accompanied by a 13.8% growth in GAAP earnings per share. Looking five years down the line, GAAP EPS is projected to keep rising at a compounded rate of 15.1% annually.

Axon, AI, Software and Tech

Like many companies, Axon is also beginning to explore the potential uses of AI within its business.

In April, the company introduced its new Draft One product, a software that uses generative AI to write police reports using audio captured from Axon’s body cameras. The draft must still be approved by a human officer, but the company touts this system as a solution for helping police officers spend less time filling out reports each day.

This entry into generative AI represents part of a broader push on Axon’s part to become a go-to provider of policing software.

To this end, Axon has created its own cloud ecosystem that can gather and store data from body cameras, evidence management software and other Axon products. The continued push into the software arena is crucial for the company, as providing software offers much higher margins than manufacturing hardware.

Axon also continues to invest in new technologies to broaden its portfolio of policing solutions. Recently, much of the company’s focus has been on drone technology.

In May, Axon announced plans to acquire Dedrone, a startup company focused on countering malicious drone activity. The company has also partnered with drone manufacturer Skydio to explore the applications of autonomous drones as first responders in emergency situations.

Axon Has Lots of Cash To Grow

Another positive about Axon is its balance sheet. With a debt-to-equity ratio of 0.4 and a current ratio of 2.9, the company is in an excellent position to manage its modest liabilities.

The company’s reserve of cash and cash equivalents stood at $403.9 million as of the end of Q1, and total current assets at the same time totaled $2.20 billion.

Here, it’s also worth considering the advantages Axon derives from doing business almost exclusively with essential government agencies.

Though spending can certainly fluctuate, police departments require equipment in both good and bad economic times. Axon’s push into the software world has also created opportunities for reliable long-term contracts that deliver a stable, predictable revenue flow.

Axon Is Attractive but Also Expensive

With a revenue base coming from reliable government spending, a strong track record of growth, high-margin opportunities in policing software and a very solid balance sheet, Axon is undoubtedly an attractive business.

One issue investors may run into, however, is its rather high valuation. Shares of the company trade at 62.8x forward earnings, 13.2x sales and 94.7x cash flow.

At these levels, Axon will have to keep delivering market-beating growth in order to avoid a selloff. Despite this fact, though, Wall Street remains quite optimistic when it comes to the stock’s upside.

With the stock currently trading at a little under $300 per share, even the lowest standing price forecast of $320 would result in an upside of about 9.2%. At the average forecast range of $367, this upside rises to over 25%.

Is Axon a Buy?

Axon Enterprise is a case in which paying a high valuation premium is likely reasonable. The company has more than proven its ability to raise revenues over long periods of time and through a variety of economic conditions.

Given the trend of improving net margins and the company’s continued investment into new and potentially lucrative technologies, Axon has a real chance to justify the high price tag that goes along with the stock.

Axon could represent a decent buy for growth investors looking for long-term compounding opportunities with the potential to outperform the market. Provided the company can keep its growth trend going, Axon may be a good stock to buy and hold for many years to take advantage of continued spending on public safety technologies.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.