Axon currently trades at $547.98 and has been a dream stock for shareholders. It’s returned 689% since March 2020, blowing past the S&P 500’s 116% gain. The company has also beaten the index over the past six months as its stock price is up 37.1% thanks to its solid quarterly results.
Is now still a good time to buy AXON? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.
Why Is AXON a Good Business?
Providing body cameras and tasers for first responders, AXON (NASDAQ: AXON) develops technology solutions and weapons products for military, law enforcement, and civilians.
1. Elevated Demand Drives Higher Sales Volumes
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful Law Enforcement Suppliers company because there’s a ceiling to what customers will pay.
Axon’s units sold punched in at 164,408 in the latest quarter, and over the last two years, averaged 37% year-on-year growth. This performance was fantastic and shows its offerings have a unique value proposition (and perhaps some degree of customer loyalty). 
2. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Axon’s margin expanded by 28.4 percentage points over the last five years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Axon’s free cash flow margin for the trailing 12 months was 16.5%.
3. New Investments Bear Fruit as ROIC Jumps
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Axon’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.
Final Judgment
These are just a few reasons why Axon ranks near the top of our list, and with its shares outperforming the market lately, the stock trades at 88.5× forward price-to-earnings (or $547.98 per share). Is now the right time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More Than Axon
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Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
