AXON Enterprise (NASDAQ:AXON) as a CAN SLIM Investment Candidate

The CAN SLIM investment methodology, developed by William O'Neil, combines fundamental and technical analysis to find high-growth market leaders. This strategy focuses on companies showing strong quarterly and annual earnings growth, innovative products or services, and notable institutional sponsorship, all while timing entries with the overall market trend. By screening for stocks that meet these strict criteria, investors try to capture major upside during bull markets while using firm risk management.

How AXON Enterprise Fits the CAN SLIM Profile

AXON ENTERPRISE INC (NASDAQ:AXON) appears as a noteworthy candidate for investors using the CAN SLIM approach. The company, which develops hardware and cloud software solutions for public safety agencies, shows several characteristics that match closely with the system's main ideas. A close review of its financial and technical metrics explains why it is prominent in a screen based on this strategy.

Meeting the Fundamental 'C' and 'A' Criteria

The 'C' in CAN SLIM stresses current, large quarterly earnings and sales growth. AXON shows notable strength here, a key factor as speeding growth is often a sign of further price increases.

• Quarterly EPS Growth (Q2Q): 76.7%
• Quarterly Sales Growth (Q2Q): 32.6%

These numbers are much higher than the system's usual minimum requirement of 18-20% growth, pointing to strong recent operational momentum. The 'A' criterion needs a history of solid annual earnings increases, making sure the company's performance is not a one-quarter event. AXON also meets this with a firm 3-year EPS compound annual growth rate (CAGR) of 36.3%, indicating a maintained pattern of profitability growth that is necessary for long-term growth investing.

Leadership, Supply, and Institutional Sponsorship

The 'L' and 'I' criteria focus on market leadership and institutional sponsorship. AXON’s relative strength (RS) rating of 87.2 shows it is performing better than 87% of all stocks in the market, a sign of a genuine market leader. This solid price performance compared to peers implies that the market is acknowledging its fundamental strengths. Also, institutional ownership is at 82.0%, which is within the preferred range for CAN SLIM. It is high enough to verify professional investor interest but not so high that ownership is maxed out, allowing for more institutional buying which can create upward pressure on the stock price. The company also keeps a reasonable debt-to-equity ratio of 0.63, matching the 'S' criterion's focus on sound financials.

Technical and Valuation Context

From a technical perspective, the situation is varied but gives important context. According to the technical analysis report, AXON’s long-term trend is neutral, while the short-term trend has lately become negative. The stock is now trading nearer to the lower part of its one-month range, suggesting it may be in a phase of consolidation or decline after a large 79.3% gain over the past year. This matches the 'M' criterion, which highlights the significance of general market direction; while the S&P 500's trends are positive, individual stock entry points are vital.

The fundamental analysis report gives AXON a score of 5 out of 10, pointing out its very good growth profile but saying its valuation is high with a P/E ratio above 100. This is common for high-growth companies and stresses the importance of the CAN SLIM system's technical timing rules to look for better entry points instead of buying on fundamentals only.

Summary and Further Research

AXON Enterprise makes a solid case for CAN SLIM investors because of its very high quarterly growth, notable annual earnings path, high relative strength, and suitable level of institutional interest. While its valuation is expensive and the recent technical situation shows some softness, these factors are often balanced against the strong growth story. For investors following this methodology, a phase of technical consolidation might offer a more acceptable risk/reward entry point, following the system's rules.

To examine other companies currently passing similar CAN SLIM-based screens, you can check the pre-defined screener configuration here.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. The content is based on data believed to be reliable but is not guaranteed. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.