Stock Analysis on Net
Stock Analysis on Net

Axon Enterprise Inc. (NASDAQ:AXON)

This company has been moved to the archive! The financial data has not been updated since May 9, 2023.

Present Value of Free Cash Flow to the Firm (FCFF)

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Axon Enterprise Inc., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

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Year Value FCFFt or Terminal value (TVt) Calculation Present value at 11.41%
01 FCFF0 179,697
1 FCFF1 182,590 = 179,697 × (1 + 1.61%) 163,885
2 FCFF2 189,487 = 182,590 × (1 + 3.78%) 152,652
3 FCFF3 200,750 = 189,487 × (1 + 5.94%) 145,158
4 FCFF4 217,032 = 200,750 × (1 + 8.11%) 140,855
5 FCFF5 239,339 = 217,032 × (1 + 10.28%) 139,420
5 Terminal value (TV5) 23,242,193 = 239,339 × (1 + 10.28%) ÷ (11.41% – 10.28%) 13,539,050
Intrinsic value of Axon Enterprise Inc. capital 14,281,020
Less: Convertible notes (fair value) 687,300
Intrinsic value of Axon Enterprise Inc. common stock 13,593,720
 
Intrinsic value of Axon Enterprise Inc. common stock (per share) $183.98
Current share price $226.88

Based on: 10-K (reporting date: 2022-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

Axon Enterprise Inc., cost of capital

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Value1 Weight Required rate of return2 Calculation
Equity (fair value) 16,763,098 0.96 11.86%
Convertible notes (fair value) 687,300 0.04 0.53% = 0.99% × (1 – 46.72%)

Based on: 10-K (reporting date: 2022-12-31).

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 73,885,305 × $226.88
= $16,763,097,998.40

   Convertible notes (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (25.10% + 57.50% + 72.60% + 57.40% + 21.00%) ÷ 5
= 46.72%

WACC = 11.41%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Axon Enterprise Inc., PRAT model

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Average Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Selected Financial Data (US$ in thousands)
Interest expense 488 28 55 46 86
Net income (loss) 147,139 (60,018) (1,724) 882 29,205
 
Effective income tax rate (EITR)1 25.10% 57.50% 72.60% 57.40% 21.00%
 
Interest expense, after tax2 366 12 15 20 68
Interest expense (after tax) and dividends 366 12 15 20 68
 
EBIT(1 – EITR)3 147,505 (60,006) (1,709) 902 29,273
 
Convertible notes, net 673,967 — — — —
Stockholders’ equity 1,268,491 1,047,849 976,255 543,495 467,324
Total capital 1,942,458 1,047,849 976,255 543,495 467,324
Financial Ratios
Retention rate (RR)4 1.00 — — 0.98 1.00
Return on invested capital (ROIC)5 7.59% -5.73% -0.18% 0.17% 6.26%
Averages
RR 0.99
ROIC 1.62%
 
FCFF growth rate (g)6 1.61%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

1 See details »

2022 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 488 × (1 – 25.10%)
= 366

3 EBIT(1 – EITR) = Net income (loss) + Interest expense, after tax
= 147,139 + 366
= 147,505

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [147,505 – 366] ÷ 147,505
= 1.00

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 147,505 ÷ 1,942,458
= 7.59%

6 g = RR × ROIC
= 0.99 × 1.62%
= 1.61%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (17,450,398 × 11.41% – 179,697) ÷ (17,450,398 + 179,697)
= 10.28%

where:

Total capital, fair value0 = current fair value of Axon Enterprise Inc. debt and equity (US$ in thousands)
FCFF0 = the last year Axon Enterprise Inc. free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of Axon Enterprise Inc. capital

FCFF growth rate (g) forecast

Axon Enterprise Inc., H-model

Microsoft Excel
Year Value gt
1 g1 1.61%
2 g2 3.78%
3 g3 5.94%
4 g4 8.11%
5 and thereafter g5 10.28%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 1.61% + (10.28% – 1.61%) × (2 – 1) ÷ (5 – 1)
= 3.78%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 1.61% + (10.28% – 1.61%) × (3 – 1) ÷ (5 – 1)
= 5.94%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 1.61% + (10.28% – 1.61%) × (4 – 1) ÷ (5 – 1)
= 8.11%