SID 0016: Taser International - Part 1

In part 1 of our discussion of Taser International stock, we explore how there are two segments.  Its conductive electronic weapons (CEWs) enjoy extraordinarily high profitability with mid-30's operating margins fully burdened, and competition barely exists.  The other segment is Axon, which contains its emerging evidence.com cloud-based evidence management system, which reduces paperwork for police officers, helps manage the multi-million dollar risks of large civil settlements, and organizes cases prosecutors advance to convict criminals.  Institutional managers of equities might pass over shares of Taser, because they appear expensive based upon the combined corporate earnings from both segments.  We believe such an approach is deficient, because profits in CEWs are undercut by losses in Axon, where the company is accommodating large trials with cities such as New York and London that might soon purchase a subscription to evidence.com.  In our opinion, Taser showcases how GARP Research has found interesting opportunities for its institutional equity research clientele through intensive fundamental research and deep understanding of how to analyse stocks through modelling financial statements and segment details.

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Stocks-in-Depth thoroughly examines the fundamentals of reasonably valued high-quality small and mid-cap growth companies. It is produced by GARP Research, a provider of equity research to institutions including many of the most well-known fund managers for over 20 years. GARP is known for its granular modelling of business lines and in-depth assessment of competition and served markets. Stocks-in-Depth searches for value and growth by researching stocks that may be out of favor, or where a major catalyst to earnings growth is hidden. Our financial models attempt to shed light on trends underneath opaque segment reporting. Stocks in Depth emphasizes balance sheet accounts and profitability margins to determine underlying return on capital, and maintains healthy skepticism regarding pro forma adjustments and undue reliance upon unconventional measures such as EBITDA. We emphasize field visits with managements, industry conferences, non-public competitors and ancillary fields to detect industry dynamics. In our search for the best companies and investment opportunities, we often challenge the consensus view. StocksinDepth forecasts over the long-term, typically over about a three year horizon, and review track records going back for years.