Axon Enterprise vs. Turning Point Brands: Which Slumping Stock Is a Better Rebound Candidate Right Now?

Choosing between a high-growth technology provider and a steady consumer products company involves balancing innovation against brand resilience. Investors are currently weighing Axon Enterprise Inc (NASDAQ:AXON) against Turning Point Brands Inc (NYSE:TPB) to see which fits better.

Axon Enterprise provides mission-critical hardware and software for law enforcement, while Turning Point Brands manages a portfolio of alternative tobacco products. Though they operate in vastly different sectors, both companies rely on strong brand loyalty and recurring revenue to drive their long-term growth strategies.

The case for Axon Enterprise

Axon Enterprise provides an integrated platform of hardware and cloud software designed for public and private safety workflows. The company is best known for its Taser devices and body cameras, but its most significant growth engine is now the Axon Cloud, which stores and manages digital evidence. According to its latest annual report for 2025, no single customer accounted for more than 10% of total net sales, reducing the risk often associated with large government contracts.

In FY 2025, revenue reached about $2.8 billion, representing a significant increase of approximately 34% over the prior year. This growth was supported by the continued adoption of its cloud-based services and expanded hardware deployments across local and federal agencies. The company reported a net income of approximately $125 million for the period, resulting in a net margin of roughly 4.5% as it continues to invest heavily in its research and development efforts.

As of its December 2025 balance sheet, its current ratio, which measures the ability to pay short-term liabilities with short-term assets, stands at nearly 2.5x. The debt-to-equity ratio, which compares total debt to shareholder equity, is approximately 0.6x. Free cash flow for the year was about $75.1 million. Free cash flow is calculated as cash from operations minus capital expenditures. Note that stock-based compensation represented roughly 300% of operating cash flow, meaning reported cash generation is heavily inflated by this non-cash add-back.

The case for Turning Point Brands

Turning Point Brands is a branded consumer products company that markets and distributes alternative smoking accessories and consumables, including its well-known Zig-Zag and Stoker's brands. The company operates in a stable niche among consumer staples stocks, shipping to nearly 900 distributors and 600 secondary wholesalers across North America. Its products are currently available in approximately 220,000 retail locations, ranging from convenience stores to specialized dispensaries.

In FY 2025, revenue reached approximately $463.1 million, reflecting growth of more than 28% compared to the previous year. This performance was driven by strong demand for its rolling papers and chewing tobacco products. The company achieved net income of about $58.2 million for the fiscal year, with a net margin of approximately 13%. This reflects a consistent ability to generate profits from its established brand portfolio despite the mature nature of the broader industry.

As of its December 2025 balance sheet, the company maintains a robust current ratio of nearly 5.6x, indicating a strong liquidity position for meeting short-term obligations. Its debt-to-equity ratio, which measures total debt relative to shareholders' equity, is approximately 0.9x. Free cash flow for the fiscal year was roughly $43.8 million, representing the cash remaining after subtracting capital expenditures from operating cash flow. These steady cash flows support the company's ongoing operations and marketing initiatives.

Risk profile comparison

Axon Enterprise faces several risks, including a high revenue concentration within U.S. law enforcement agencies and a heavy dependence on its Taser product line. The company is subject to significant product liability and wrongful death litigation risks stemming from the use of its products in high-stakes environments. Furthermore, its expansion into AI and cloud services introduces cybersecurity vulnerabilities and regulatory uncertainty. Axon also competes against established players like Motorola Solutions (NYSE:MSI) and Tyler Technologies (NYSE:TYL), as well as specialized firms such as Wrap Technologies (NASDAQ:WRAP) and Byrna Technologies (NASDAQ:BYRN).

Turning Point Brands deals with the continued volume decline in the overall U.S. tobacco market as consumers move away from combustible products. The company relies on a limited number of key suppliers, particularly for its cigarette papers and chewing tobacco, which creates supply chain vulnerability. Increasing FDA regulatory oversight, including premarket authorization requirements, remains a constant challenge for its nicotine-based products. Turning Point Brands must also navigate a competitive landscape that includes industry giants like Philip Morris International (NYSE:PM), British American Tobacco (NYSE:BTI), and Imperial Brands (OTC:IMBBF).

Valuation comparison

Turning Point Brands offers a significantly lower valuation based on its revenue, while Axon Enterprise carries a much higher premium due to its rapid growth and software-driven business model.

Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.

Which stock would I buy in 2026?

Turning Point Brands faces some headwinds in its main market, the U.S., due to declining smoking rates. Smoking as a habit is declining globally and has hit its lowest level in the U.S., at under 10% of all adults, down from a peak of about 46% in the mid-1960s. That means its rolling paper products could see declines.

But fortunately, most of its business is smoking alternative products. That means Turning Points Brands should see sales rise 13% this year to about $525 million, with net income of $58 million. That's a 45% jump in profits. Nicotine pouch sales in the U.S. as a category grew 500% last year and are expected to remain strong this year. Still, there is a risk around pouches being hit by more regulations, and the fact that oral tobacco in the past was deeply criticized for contributing to oral cancers.

Axon Enterprise, meanwhile, has a fine outlook for growth as law enforcement is increasingly equipped with Tasers and the public is becoming increasingly demanding that agents wear body cameras.

Expansion into Europe and Canada should also help, as should a focus on producing personal consumer-protection devices. In particular, all the data and video created by Axon customers have to be managed, and the company is seeing strong demand for its AI-based management systems from customers who find many of the services create efficiencies within their operations.

In its fiscal 2026, sales are seen growing well, up about a third to $3.7 billion, with net income of $275 million and free cash flow of $447 million, well over 2025's levels.

Both companies' shares have had a difficult 2026, each declining by more than 20% year to date. Axon Enterprise comes at a premium compared to Turning Point Brands when comparing their P/S and forward P/E ratios. Still, the overall market for security products continues to expand while tobacco-related products are in decline in TPB's major markets. For long-term investors, that makes Axon Enterprise the better turnaround candidate.

Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Axon Enterprise and Tyler Technologies. The Motley Fool recommends British American Tobacco P.l.c., Imperial Brands Plc, Philip Morris International, and Turning Point Brands. The Motley Fool has a disclosure policy.