Axon Enterprise, Inc.AXONNASDAQ

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $190.92 per share(market-calibrated)

-66.6%

Upside to Fair Value

Current

$572.02

Pure Model

$63.89

Fair Value

$190.92

Bull Case

$91.93

Bear Case

$41.32

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

Unreachable

Calibrated Growth

75/25 blend

Market price implies assumptions beyond model range. Fair value blends 75% model / 25% market price.

What's Driving This Ratingfor AXON

✓

CapEx already efficient

CapEx at 2.74% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 7.19% — below the sector mature average of 13.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $937M (11.78% margin).

⚠

Analyst growth decelerates sharply

Revenue growth drops from 29.11% in Year 1 to 2.25% by Year 5 (per analyst consensus). This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $37.17/share (12.0x terminal FCF) while exit multiple gives $90.61/share (32.3x terminal FCF). The 18x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.25% growth is more conservative. The base case averages both methods.

⚠

Market price exceeds model's maximum

Even with the most optimistic terminal growth the model allows, it can't reach $572.02. The market is pricing in factors beyond the DCF framework — possibly optionality, brand premium, or expectations of margin/growth inflection not yet in analyst estimates.

→

Moderate cash flow conversion

Year 10 FCF/EBITDA conversion is 55.73% — acceptable but leaves room for improvement. High reinvestment needs consume a meaningful portion of operating cash flow.

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.48

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)11.17%

Cost of Debt

Pre-tax Cost of Debt1.13%

Tax Rate21.00%

After-tax Cost of Debt0.90%

Equity Weight (E/V)96.01%

Debt Weight (D/V)3.99%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (96.01% × 11.17%) + (3.99% × 0.90%)

= 10.76%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$3.6B	$6.0B	$7.1B	$7.4B	$8.0B
EBIT	$258M	$432M	$661M	$790M	$937M
Tax	$54M	$91M	$139M	$166M	$197M
NOPAT	$204M	$341M	$522M	$624M	$741M
+ Depreciation	$54M	$90M	$106M	$111M	$119M
- Capex	$98M	$165M	$195M	$204M	$218M
- Δ NWC	$243M	$410M	$47M	$49M	$53M
Free Cash Flow	-$84M	-$144M	$386M	$482M	$589M
Discount Factor	0.903	0.736	0.600	0.489	0.360
Present Value	-$76M	-$106M	$232M	$236M	$212M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$589M

Terminal Growth Rate2.25%

WACC10.76%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$7.1B

PV of Terminal Value$2.5B

Exit Multiple Method

Year 10 EBITDA$1.1B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$19.0B

PV of Terminal Value$6.8B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$1.2B

PV of Terminal Value$2.5B

Enterprise Value$3.7B

(-) Net Debt$709M

Equity Value$3.0B

Shares Outstanding80M

Price per Share$37.17

Exit Multiple Method

PV of Projected FCFs$1.2B

PV of Terminal Value$6.8B

Enterprise Value$8.0B

(-) Net Debt$709M

Equity Value$7.3B

Shares Outstanding80M

Price per Share$90.61

Pure Model Fair Value

$63.89

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.25%	1.75%	2.25%	2.75%	3.25%
8.76%	$80.27	$81.90	$83.78	$85.97	$88.57
9.76%	$70.41	$71.57	$72.88	$74.39	$76.12
10.76%	$62.09	$62.94	$63.89	$64.96	$66.17
11.76%	$54.95	$55.59	$56.29	$57.08	$57.95
12.76%	$48.75	$49.24	$49.77	$50.36	$51.01

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$41.32

-92.8% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.85

Base Case

$63.89

-88.8% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.48

Bull Case

$91.93

-83.9% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 1.26

Key Assumptions & Drivers• Industrials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth29.11%

Year 3 Revenue Growth29.47%

Year 5 Revenue Growth2.25%

Year 7 Revenue Growth2.25%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin7.19%

Terminal EBIT Margin13.00%

Tax Rate21.00%

Historical Capex / Rev2.74%

NWC / Revenue30.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 18x EV/EBITDA (Industrials sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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