Axon Enterprise Inc. (NASDAQ:AXON)

An analysis of the quarterly financial ratios over the observed periods reveals several noteworthy trends and fluctuations in performance metrics.

Return on Assets (ROA)

The ROA exhibited a downward trend starting from a positive 3.07% in early 2019, declining steadily to near zero and eventually negative values throughout much of 2020 and 2021. The lowest points occurred around mid-2020 and mid-2021 with ROA reaching below -4%. However, from early 2022 onward, there was a marked recovery in asset profitability, peaking above 7% in mid-2022 before experiencing a slight decline but maintaining positive values around 4.5% by the first quarter of 2023. This suggests a period of operational challenges followed by a significant improvement in asset utilization efficiency.

Financial Leverage

Financial leverage ratios remained relatively stable around 1.5 to 1.6 between 2019 and early 2022, indicating a consistent level of debt relative to equity. A noticeable increase began in late 2022, reaching over 2.2 by the first quarter of 2023. This rise in leverage indicates an increased reliance on debt financing, which may imply strategic shifts towards funding growth or restructuring but also introduces higher financial risk through greater obligations.

Return on Equity (ROE)

ROE trends closely mirror those of ROA but with amplified fluctuations, reflecting the combined effect of operational performance and financial leverage. Starting at 4.72% in early 2019, ROE declined sharply into negative territory during 2020 and 2021, with the lowest point near -6.4%. A recovery phase began in early 2022, with ROE surging to nearly 12% in mid-2022 and maintaining elevated levels above 8% throughout late 2022 into early 2023. The increased ROE reflects improved profitability and the impact of higher financial leverage, indicating enhanced returns to shareholders despite the increased financial risk.

Net Profit Margin

The net profit margin exhibited a fluctuating trend over the observed periods. Initially, it showed a positive margin around 5.22% in early 2019, but this declined sharply near the end of 2019, even turning negative from the first quarter of 2020 through the end of 2021. The margin reached its lowest points in mid-2020 and mid-2021, with values around -6%. Starting in early 2022, the net profit margin reversed course significantly, rising to double-digit positive levels by mid-2022, peaking at 14.2%. It remained strong through early 2023, maintaining values above 10%.

Asset Turnover

Asset turnover ratios remained relatively stable throughout the period, generally oscillating between 0.42 and 0.64. There was a modest decline observed beginning in mid-2020, where the ratio dropped from around 0.64 to lower levels near 0.42 by early 2023. This indicates a slight decrease in efficiency in using assets to generate revenue over time.

Financial Leverage

Financial leverage showed subtle variation but an overall upward trend, especially notable from late 2021 onward. It began at approximately 1.54 and held fairly steady through much of 2019 and 2020, with small fluctuations. From late 2021 into 2023, leverage increased notably, surpassing 2.0 by early 2023. This increase may suggest a higher reliance on debt or other obligations relative to equity during this period.

Return on Equity (ROE)

ROE mirrored the trend seen in net profit margin, starting positive in early 2019 at around 4.72% but declining to negative territory from early 2020 through the end of 2021. The lowest ROE values approached -6%, signaling periods of loss or poor equity returns. A strong recovery occurred beginning in early 2022, with ROE climbing to nearly 12% mid-2022 and maintaining elevated levels above 8% through early 2023. This improvement aligns with the positive shifts in profitability shown in net profit margin.

Net Profit Margin

The net profit margin exhibited significant fluctuations over the observed periods. Initially, there was a positive margin around 5.22% at the beginning of 2019, followed by a steady decline throughout 2019 into negative territory by early 2020. The lowest margins were recorded during mid-2020, dropping to approximately -6.37%. A recovery phase began in 2022, with margins improving substantially to peak at 14.2% in mid-2022, though the margin slightly moderated thereafter, ending near 10.76% in early 2023. This indicates a period of operational challenges followed by a notable profitability resurgence.

Asset Turnover

Asset turnover remained relatively stable with minor variations. It started at 0.59 in early 2019, maintained around 0.6 through the end of 2019, then declined to approximately 0.48-0.49 during mid to late 2020. From early 2021 to early 2022, the ratio hovered around 0.51-0.53, indicating consistent efficiency in asset utilization. However, a decline to 0.42 occurred by early 2023, suggesting a reduction in the company’s efficiency in generating revenue from its asset base toward the end of the period.

Return on Assets (ROA)

Return on assets followed a pattern similar to net profit margin. Starting at 3.07% in early 2019, ROA fell steadily to negative figures by early 2020, reaching lows around -3.12% in late 2020. The company experienced a recovery beginning in 2022, with ROA improving to 7.29% in mid-2022 before slightly declining but remaining positive, ending at about 4.57% in early 2023. This recovery reflects enhanced profitability relative to the asset base after a period of operational or economic difficulties.