Axon Enterprise, Inc.AXONNASDAQ
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DCF Valuation
⚠️Model Warnings
- •Terminal value represents 105% of enterprise value. Valuation highly sensitive to long-term assumptions.
DCF Valuation Summary
Strong Sell
Fair Value: $136.97 per share(market-calibrated)
-68.3%
Upside to Fair Value
Current
$431.94
Pure Model
$38.65
Fair Value
$136.97
Bull Case
$59.75
Bear Case
$22.05
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 3.05% 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 5.68% — below the sector mature average of 13.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $781M (11.47% margin).
⚠
Analyst growth decelerates sharply
Revenue growth drops from 65.06% 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 $16.66/share (12.1x terminal FCF) while exit multiple gives $60.64/share (29.4x 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 $431.94. 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.
✓
Strong cash flow conversion
Year 10 FCF/EBITDA conversion of 61.28% indicates efficient cash generation. FCF reaches $533M by Year 10 (7.83% FCF margin).
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 Debt0.20%
Tax Rate5.00%
After-tax Cost of Debt0.19%
Equity Weight (E/V)95.89%
Debt Weight (D/V)4.11%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (95.89% × 11.17%) + (4.11% × 0.19%)
= 10.72%
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 | $3.4B | $5.3B | $6.1B | $6.4B | $6.8B |
| EBIT | $195M | $300M | $507M | $637M | $781M |
| Tax | $10M | $15M | $25M | $32M | $39M |
| NOPAT | $186M | $285M | $481M | $605M | $742M |
| + Depreciation | $45M | $69M | $80M | $84M | $89M |
| - Capex | $105M | $161M | $186M | $194M | $208M |
| - Δ NWC | $815M | $601M | $81M | $84M | $90M |
| Free Cash Flow | -$689M | -$408M | $295M | $410M | $533M |
| Discount Factor | 0.903 | 0.737 | 0.601 | 0.490 | 0.361 |
| Present Value | -$622M | -$300M | $177M | $201M | $193M |
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$533M
Terminal Growth Rate2.25%
WACC10.72%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$6.4B
PV of Terminal Value$2.3B
Exit Multiple Method
Year 10 EBITDA$870M
Exit Multiple (EV/EBITDA)18.0x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$15.7B
PV of Terminal Value$5.7B
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs-$114M
PV of Terminal Value$2.3B
Enterprise Value$2.2B
(-) Net Debt$947M
Equity Value$1.3B
Shares Outstanding$76M
Price per Share$16.66
Exit Multiple Method
PV of Projected FCFs-$114M
PV of Terminal Value$5.7B
Enterprise Value$5.5B
(-) Net Debt$947M
Equity Value$4.6B
Shares Outstanding$76M
Price per Share$60.64
Pure Model Fair Value
$38.65
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% |
|---|---|---|---|---|---|
| 8.72% | $27.31 | $30.49 | $34.17 | $38.46 | $43.53 |
| 9.72% | $19.25 | $21.51 | $24.07 | $27.00 | $30.38 |
| 10.72% | $13.15 | $14.81 | $16.66 | $18.74 | $21.11 |
| 11.72% | $8.45 | $9.69 | $11.06 | $12.59 | $14.30 |
| 12.72% | $4.74 | $5.69 | $6.73 | $7.88 | $9.15 |
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
$22.05
-94.9% vs current
- • -25% vs analyst consensus
- • Terminal growth: 2.0%
- • Beta: 1.85
Base Case
$38.65
-91.1% vs current
- • Analyst consensus
- • Terminal growth: 2.3%
- • Beta: 1.48
Bull Case
$59.75
-86.2% 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 Growth65.06%
Year 3 Revenue Growth23.33%
Year 5 Revenue Growth2.25%
Year 7 Revenue Growth2.25%
Year 10 Revenue Growth2.25%
Terminal Growth Rate2.25%
Margin & Efficiency
Current EBIT Margin5.68%
Terminal EBIT Margin13.00%
Tax Rate5.00%
Historical Capex / Rev3.05%
NWC / Revenue60.13%
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 (S&P 500: 22x P/E)
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.