AXON is a buy/add; <10x sales, 35% growth, gaining share vs Motorola.

We've done a couple of videos on the company Axon, but its biggest competitor we have not done a video on, and that company is Motorola.

So we're gonna dig deep, look at both of them, compare them, as well as some other adjacent companies in this, we'll call it public safety sector.

But the overlap between Motorola and Axon. Motorola Solutions, as Kasey was saying, far and away the bigger business in terms of revenue. Here's the most recent quarter toggle.

Over three times the revenue on a quarterly basis. $3.1 billion for Motorola versus $904 million for Axon.

In terms of size, Motorola gets highlighted here as the winner. But in revenue growth, 13% year over year for Motorola, 35% for Axon.

Axon has teamed up with a company called Skydio. This company, Skydio, manufactures drones that are deployed when an emergency arises and obviously, a drone can get to an emergency situation much faster than a police officer or a firetruck.

They can get to that scene and assess along the way, what is the best route to take, see whatever's happening in real time, and then it can send that information back to the command center and deploy the appropriate people hopefully in the manner that is quickest to get to that emergency situation.

They can also do facial recognition, so if there's a crime being committed, hopefully they catch that criminal in action, and be able to send that information back, because a lot of times maybe the police officers when they get there, the criminal has left.

Yeah, so Axon gets most of the attention from investors because of that 30% plus growth rate, which has definitely been helped with numerous acquisitions in the last couple of years.

Depending on the type of investor you are, you may not want to deal with the higher amount of uncertainty that goes with Axon because they're making aggressive acquisitions. There's lots of stock-based compensation that eventually will have to flip and turn into shareholder returns via stock repurchases and perhaps a dividend.

Axon is the young high growth business. They don't generate very much in margin either on a GAAP operating basis or on a free cash flow basis. They should someday in the future, but currently no.

Axon at the top of this list, followed by Motorola.

So, not this huge revenue growth that you're seeing with Axon, but Motorola is a much more mature company.

Yeah, and no doubt in response to Axon acquiring Dedrone earlier this year.

All right, let's save that thesis and then let's take a look at how Axon looks on our reverse DCA. Okay, so we'll do the same thing. Let's open it in an investment thesis and let's play with the numbers.

This one's a lot trickier because the earnings per share and free cash flow, as we already reviewed on the company comparison, are quite low. I think we need to do a custom override on this, and we have a new tool on how you can do a earnings normalization or as we have sort of half jokingly called it a fake profitability.

No, pretend. Pretend. Pretend profitability. We'll debut the new tool later this week. For now, let's just weight this to earnings per share. It's much higher. It's at $2.41 versus $1.63.

Or if we wanted to normalize this, we could go back and look at what Axon has reported in the past. Actually there's the big jump in earnings per share, early this year related to taxes.

Early twenty twenty-five, late twenty twenty-four, they were at more like a dollar per quarter in earnings per share. So actually, instead of weighting to the current trailing twelve-month earnings per share, let's do a custom weight override, and let's assume four dollars in annual earnings per share is a normalized rate of earnings per share for Axon at this particular point in time.

Pretend profitability. They're obviously not there, but let's assume if we normalize it because of all the investments they're making, acquisitions they're making, let's say four dollars on an annual basis.

What gets them to fair value right now over the next ten years? Let's do a terminal rate of four percent just to build in a little bit of safety. What's the average growth rate over the next ten years to get us to fair value?

It's quite high, about thirty percent which is down quite a bit. I think the last time we did this, it was well over thirty percent.

We've had a recent sell-off again. Axon is below five hundred dollars per share. After this recent sell-off, we're back about 10 times price to sales ratio, maybe a little bit below 10 times price to sales.

Under 10 times price to sales, given the company's fast pace of growth and scooping up lots of market share at Motorola's expense, it looks like a reasonable nibble , a small add to the portfolio.

So should we save a thesis here? We already have an Axon position, but this would be a point where we would maybe add a little bit more if we needed it. I think we'd rank this as a buy, or if you wanna put this on your watch list.

Definitely early growth, and this is the secular growth trend leader and part of a public safety basket of stocks in the one-liner thesis.