Axon Enterprise (NASDAQ:AXON) and American Outdoor Brands (NASDAQ:SWBI) sell to a lot of the same customers in law enforcement, but their positions today couldn't be further apart. Axon's taser and body camera business is booming as law enforcement looks for ways to be more effective and efficient in its work. Meanwhile, the firearm sales that drive American Outdoor's business are plummeting. 

Gun sales will recover eventually, but they may not bounce back fast enough to make American Outdoor a better stock than Axon Enterprise. 

Officer charging an Axon body camera.

Image source: Axon Enterprise.

The boom and bust of firearm sales

It may seem logical that a favorable policy environment, driven by Republicans dominating national politics, would help gun manufacturers, but that's not the case. Sales of firearms have plummeted since President Trump took office, and American Outdoor Brands has felt the brunt of the drop.

In the company's fiscal second quarter, management said that NICS background checks for handguns fell 15%, while handguns shipped to customers dropped about 50%. Long gun NICS background checks fell 16%, so the decline was widespread. If you look at American Outdoor's financial performance over the past year, you can see that the decline in sales is hitting the company hard.

AOBC Revenue (Quarterly) Chart

AOBC Revenue (Quarterly) data by YCharts

Not all is bad with American Outdoor's business, though. Outdoor Products & Accessories sales rose 23% in the quarter due to acquisitions. The company has focused on diversifying away from firearms, a wise strategy, but it isn't doing so fast enough to eliminate the decline in firearm sales in 2017. 

Axon's sales continue to soar

As firearm sales to consumers fall, law enforcement continues to buy more tasers and body cameras. You can see in the chart below that Axon's sales are growing rapidly, and with $494.2 million in future contracted revenue, primarily for cloud services for body cameras, the growth should continue.

AAXN Revenue (Quarterly) Chart

AAXN Revenue (Quarterly) data by YCharts

What you can also see is that Axon barely makes a profit. That's mostly because the company has been spending its money growing R&D and sales expenses to drive future growth. Management says it'll focus more on profitability in 2018, so look for the strategy to drive a lot of bottom-line growth. 

What's really exciting is that Axon is driving better functionality with its products, with new products like a records management system, a holster that automatically turns body cameras on when a gun is pulled, and a new camera for vehicles. These products should drive both higher adoption rates and more revenue per customer. 

The hands-down winner

I don't think there's any question that Axon Enterprise is the better of these two stocks right now. The company is riding a wave of body camera adoption worldwide, and is the industry's clear leader. Meanwhile, firearm sales continue to fall, and we don't know when American Outdoor will hit bottom. I'll happily keep my outperform rating on Axon Enterprise on Motley Fool CAPS, and I think this will be a market beater for many years to come. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.