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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Axon Enterprise (NASDAQ:AXON). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for Axon Enterprise
Axon Enterprise's Improving Profits
In the last three years Axon Enterprise's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Axon Enterprise's EPS shot up from US$1.48 to US$1.95; a result that's bound to keep shareholders happy. That's a impressive gain of 32%.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The music to the ears of Axon Enterprise shareholders is that EBIT margins have grown from 4.1% to 9.4% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Axon Enterprise's forecast profits?
Are Axon Enterprise Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We do note that, in the last year, insiders sold US$909k worth of shares. But that's far less than the US$8.7m insiders spent purchasing stock. We find this encouraging because it suggests they are optimistic about Axon Enterprise'sfuture. We also note that it was the Independent Director, Hadi Partovi, who made the biggest single acquisition, paying US$4.8m for shares at about US$191 each.