Axon currently trades at $746.40 and has been a dream stock for shareholders. It’s returned 709% since July 2020, blowing past the S&P 500’s 93.6% gain. The company has also beaten the index over the past six months as its stock price is up 23.3% thanks to its solid quarterly results.

Is now still a good time to buy AXON? Or are investors being too optimistic? Find out in our full research report, it’s free.

Why Are We Positive On Axon?

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 138,018 in the latest quarter, and over the last two years, averaged 32% 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

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

As you can see below, Axon’s margin expanded by 20.3 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 16.8%.

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 we think Axon is one of the best industrials companies out there, and with its shares topping the market in recent months, the stock trades at 125.3× forward P/E (or $746.40 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.

Stocks We Like Even More Than Axon

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