What is AXON's Intrinsic value?

Axon Enterprise Inc (AXON) Intrinsic Value Analysis

Executive Summary

As of May 27, 2025, Axon Enterprise Inc's estimated intrinsic value ranges from $145.87 to $178.18 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $178.18 -75.6%
Dividend Discount Model (Stable) $145.87 -80.1%

Is Axon Enterprise Inc (AXON) undervalued or overvalued?

With the current market price at $731.37, the stock appears to be significantly overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Axon Enterprise Inc's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.74 1
Cost of equity 7.3% 10.5%
Cost of debt 7.0% 7.0%
Tax rate 20.0% 38.1%
Debt/Equity ratio 0.01 0.01
After-tax WACC 7.3% 10.4%

Valuation Methods

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.9%
  • Long-term growth rate: 4.0%
  • Fair value: $178.18 (-75.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.5% (Low) to 7.3% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $56 to $236
  • Selected fair value: $145.87 (-80.1% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $56937M
Enterprise Value $57851M
Trailing P/E 122.44
Forward P/E 135.80
Trailing EV/EBITDA 17.60
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.01

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Dividend Discount Model (Multi-Stage) 57% $35.64
Dividend Discount Model (Stable) 43% $21.88
Weighted Average 100% $164.33

Investment Conclusion

Based on our comprehensive valuation analysis, Axon Enterprise Inc's weighted average intrinsic value is $164.33, which is approximately 77.5% below the current market price of $731.37.

Key investment considerations:

  • Strong projected earnings growth (18% to 22% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.01)

Given these factors, we believe Axon Enterprise Inc is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.