Everyone can see the benefit of using a nonlethal jolt of 50,000 volts of electricity to stop a crazed criminal in a drug-induced rampage. The same can't be said of the need to subdue a 6-year-old kid with a stun gun. And it's the sensational details of the latter, along with a few deaths, that has caused prisoner-rights group Amnesty International to call for a ban on the use of stun guns made by Taser (NASDAQ:TASR).
The stun gun was designed as an alternative to deadly force. Police officers carry an array of non-deadly weapons with them to subdue suspects without having to shoot them. Pepper spray and batons or nightsticks are some of the more prominent ones. Oleoresin capsicum, or OC, delivers a pepper-based spray that generally, but not always, incapacitates the suspect temporarily by causing his eyes to water and making it more difficult to breathe. Batons, meanwhile, are made of wood, metal, or polycarbonate materials are used for pain compliance and control. Each, when used properly, gives the police officer another less-than-lethal tool in his toolbox for apprehending criminals, controlling unruly people, and being able to go home safe at the end of his tour of duty.
So too with the Taser stun gun. The device shoots two barbed darts up to 21 feet away, and the electric current can penetrate two inches of clothing. It lets the officer control the suspect without having to shoot him or engage him mano-a-mano. TV shows notwithstanding, going toe-to-toe with a criminal is more likely to result in serious injury or death.
Amnesty International has said it is not completely opposed to the use of stun guns but rather wants to have their use studied to ensure they are not causing deaths. In the interim, it wants a moratorium placed on their use. Taser has responded by saying the prisoner rights group is ignoring the body of evidence already showing they are safe and have led to a reduction in the use of lethal force. Phoenix has seen police shootings drop by 31% since introducing the Taser, while Miami reports only one shooting since it adopted the stun gun.
Investors have liked what they've seen, too. Taser's stock has been on a tear, rising more than 500% over the past year, and it has split three times during that period. In June, the company offered guidance of a 150% leap in revenue growth followed in July by a reported 13-fold increase in profits. Still, at a P/E of 46 and an enterprise value-to-free cash flow (EV/FCF) of 93, the stock ain't cheap.
Lost in Amnesty International's chatter about using a Taser on a 6-year-old is the fact that the kid was wielding glass shards from a broken picture, and not only was he threatening the teacher with it but also he was injuring himself by cutting his face and leg. Use of the Taser resulted in the boy being subdued without further injury to himself and with no one else getting injured by trying to rush in.
The Taser has proven itself to be an effective non-deadly tool for law enforcement. The stock at its current lofty levels may not prove to be so resilient.
Fool contributor Rich Duprey looks resilient, if not downright resplendent, clutching a Krispy Kreme doughnut. He does not own any of the stocks mentioned in this article.
