TASER International (NASDAQ:AAXN) is starting small in Canada -- but it could get the opportunity to ramp up rapidly.

TASER's "AXON" cameras are already hard at work keeping the subways of Montreal safe. Next stop: Vancouver? Image source: TASER INTERNATIONAL.

Six months ago, TASER tiptoed across the border into Canada with the announcement of a "pilot program" sponsored by the Service de Police de la Ville de Montreal -- the Montreal police department. As TASER explained at the time, Montreal is beginning a phased deployment of Axon police body cameras to its Subway Patrol Officers and Traffic Patrol unit. Over the course of nine months, Montreal will roll out a total of 50 Axon video cameras to its officers -- and that's just the beginning.

Commenting on the pilot program, TASER Country Manager Vishal Dhir predicted that Axon and its complementary Evidence.com data storage and recovery service will be "a total game-changer for agencies in Canada interested in body-worn cameras and digital evidence management." And it turns out, TASER isn't the only one who thinks so.

As reported last month in the Vancouver Sun, a Canadian legislative committee has just recommended that the province of British Columbia mimic the move by its cousins on the other side of Canada and "aggressively pursue the steps necessary to start the police use of [body] cameras." The Sun did not mention TASER by name, and TASER rival VieVu is known to be operating in the country as well. But still, with TASER owning the lion's share of the international market for body cameras for police, it seems likely TASER's products will receive close attention if British Columbia decides to proceed with rolling out body cameras for its own officers.

And they may do just that. As the Sun notes, it's not just legislators supporting the use of police body cameras in British Columbia. The Canadian "Mounties" themselves are in favor of the move. According to a report filed by the Royal Canadian Mounted Police's Independent Investigations Office, a review of 71 investigations conducted in 2015 and 2016 suggests that 66 of these investigations would have been "potentially assisted" if the officers involved had been wearing body cameras and could have produced video evidence to support their cases.

What it means to investors

Across Canada, TASER has an opportunity to market its products -- not just Axon body cameras, but its complementary Evidence.com service, and its TASER-brand stunguns as well, to some 69,000 active duty law enforcement officers. That's only a small -- but still significant -- fraction of the 929,000 sworn law enforcement officers serving here south of the border.

If TASER can develop the Canadian market over time, however, and dominate it to the extent that already done here in the U.S., then it seems likely that Canada could ultimately be worth perhaps 7.4% of the value TASER currently derives from the U.S. market. How much would that be worth?

According to data from S&P Global Market Intelligence, TASER's U.S. business is worth $162 million in annual sales. Accordingly, TASER's entree into Canada could potentially add another $12 million in annual revenues -- and at a near-13% operating profit margin, perhaps $1.5 million in operating profits -- to the company's annual haul. 

Is this a big enough development to justify TASER's $1.3 billion market capitalization, and its valuation of 82 times earnings? I personally don't think so. If you ask me, TASER stock still looks pretty expensive relative to the profits it's earning. But if TASER is to have any chance of justifying its sky-high valuation, winning new business in Canada (and elsewhere) is absolutely essential.