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Napco Security (NSSC)
:NSSC
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Napco Security Technologies
(NASDAQ:NSSC)
80Outperform
Positive Factors
Financial Performance
NAPCO came in slightly ahead of expectations on both the top and bottom line, results were generally positive.
Market Position
NAPCO has grown or maintained market share among its key distributors and dealers.
Negative Factors
Macroeconomic Conditions
Visibility remains weak, both from a macro perspective and as it relates to several key distributors.
Market Outlook
Feedback suggests a significant slowdown had taken place well before the tariff action announcement, indicating increased uncertainty as to the economic outlook.
Sales Performance
Equipment sales struggled due in particular to a $5.1 million combined downdraft at three of NAPCO's largest distributors.
Napco Security Technologies (NSSC) vs. S&P 500 (SPY)
Market Cap
$985.19M
Dividend Yield1.72%
Average Volume (3M)505.22K
Price to Earnings (P/E)22.5
Beta (1Y)1.48
Revenue Growth-1.05%
EPS Growth-2.78%
CountryUS
Employees1,070
SectorIndustrials
Sector Strength89
IndustrySecurity & Protection Services
Share Statistics
EPS (TTM)0.28
Shares Outstanding35,656,420
10 Day Avg. Volume571,473
30 Day Avg. Volume505,222
Financial Highlights & Ratios
PEG Ratio-3.28
Price to Book (P/B)5.57
Price to Sales (P/S)0.00
P/FCF Ratio17.86
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$27.13Price Target Upside-1.81% Downside
Rating ConsensusModerate Buy
Number of Analyst Covering5
Napco Security Technologies Business Overview & Revenue Model
Company DescriptionNapco Security Technologies, Inc. is a leading provider in the security solutions sector, specializing in the design and manufacture of high-tech electronic security systems. The company's core offerings include intrusion and fire alarm systems, access control systems, and video surveillance solutions. Napco serves a diverse range of industries, including commercial, residential, institutional, industrial, and governmental sectors, ensuring comprehensive security solutions tailored to various needs.
How the Company Makes MoneyNapco Security Technologies generates revenue primarily through the sale of its security products, which include alarm systems, locking devices, and access control systems. The company also earns money through its recurring revenue services, such as alarm monitoring and subscription-based services, providing ongoing support and updates to its security solutions. Key revenue streams include direct sales to security product distributors, dealers, and installers, as well as partnerships with large-scale integrators and security service providers. Strategic alliances and innovations in security technology also play a significant role in sustaining and enhancing Napco's revenue growth.
Napco Security Technologies Financial Statement Overview
Summary
Napco Security Technologies demonstrates strong financial health across all verticals with high profitability, minimal leverage, and robust cash flow generation. The company's efficient operations and capital management position it well for continued growth within the Security & Protection Services industry.Income Statement
The income statement shows healthy profit margins with a Gross Profit Margin of 56.31% and a Net Profit Margin of 25.01% for TTM. Revenue growth slowed slightly in the TTM compared to the previous year, but EBIT and EBITDA margins remain robust at 26.57% and 27.47%, respectively. Overall, the company demonstrates strong profitability and efficient cost management.88
Very Positive
Balance Sheet
The balance sheet is strong with a low Debt-to-Equity Ratio of 0.03 and a high Equity Ratio of 84.62%. Return on Equity is impressive at 28.05%, indicating effective use of equity to generate profits. The company's leverage is minimal, enhancing financial stability and reducing risk.84
Very Positive
Cash Flow
Cash flow analysis reveals positive trends with a significant Free Cash Flow Growth Rate of 16.05% in the TTM. The Operating Cash Flow to Net Income Ratio is 1.17, indicating strong cash generation relative to net income. The Free Cash Flow to Net Income Ratio is also high at 1.12, reflecting efficient cash flow conversion.90
Very Positive
| Breakdown | |||||
| TTM | Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 | Jun 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 181.23M | 188.82M | 170.00M | 143.59M | 114.03M | 101.36M | Gross Profit |
| 102.08M | 101.75M | 73.23M | 59.16M | 50.15M | 43.59M | EBIT |
| 48.14M | 53.82M | 30.32M | 18.23M | 17.34M | 10.81M | EBITDA |
| 49.81M | 55.98M | 32.26M | 20.00M | 19.63M | 14.16M | Net Income Common Stockholders |
| 45.31M | 49.82M | 27.13M | 19.60M | 15.41M | 7.79M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 89.30M | 97.72M | 66.75M | 46.80M | 40.22M | 18.25M | Total Assets |
| 190.86M | 207.75M | 166.65M | 148.58M | 123.29M | 105.84M | Total Debt |
| 5.38M | 5.51M | 5.69M | 7.07M | 10.99M | 11.02M | Net Debt |
| -68.04M | -59.83M | -30.27M | -34.66M | -23.81M | -7.23M | Total Liabilities |
| 29.32M | 28.86M | 26.48M | 34.78M | 30.06M | 27.94M | Stockholders Equity |
| 161.55M | 178.89M | 140.17M | 113.79M | 93.24M | 77.90M |
| Cash Flow | Free Cash Flow | ||||
| 50.81M | 43.77M | 21.74M | 6.85M | 21.98M | 8.69M | Operating Cash Flow |
| 53.24M | 45.37M | 24.70M | 8.33M | 22.99M | 10.31M | Investing Cash Flow |
| 14.25M | -3.15M | -28.26M | -1.56M | -6.43M | -1.61M | Financing Cash Flow |
| -49.59M | -12.83M | -2.21M | 155.00K | 0.00 | 1.53M |
Napco Security Technologies Technical Analysis
Positive
27.63
Price Trends
23.57
Positive
27.31
Positive
34.63
Negative
Market Momentum
1.18
Negative
79.23
Negative
94.04
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NSSC, the sentiment is Positive. The current price of 27.63 is above the 20-day moving average (MA) of 23.94, above the 50-day MA of 23.57, and below the 200-day MA of 34.63, indicating a neutral trend. The MACD of 1.18 indicates Negative momentum. The RSI at 79.23 is Negative, neither overbought nor oversold. The STOCH value of 94.04 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for NSSC.
Napco Security Technologies Risk Analysis
Napco Security Technologies disclosed 24 risk factors in its most recent earnings report. Napco Security Technologies reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Napco Security Technologies Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $985.19M | 22.50 | 27.48% | 1.72% | -1.05% | -2.78% | |
75 Outperform | $1.42B | ― | -21.34% | ― | 0.27% | -18.75% | |
73 Outperform | $317.57M | 17.68 | 11.35% | 4.65% | -9.51% | -26.61% | |
73 Outperform | $367.33M | 6.02 | 15.93% | 4.18% | -6.25% | 442.27% | |
66 Neutral | $83.68M | 65.29 | -3.47% | ― | ― | ― | |
64 Neutral | $4.40B | 12.09 | 5.26% | 250.03% | 4.08% | -11.05% | |
56 Neutral | $249.39M | 16.66 | 7.70% | ― | -2.09% | ― |
* Industrials Sector Average
Performance Comparison
NSSC
Napco Security Technologies
27.63
-16.57
-37.49%
CIX
Compx International
25.69
4.66
22.16%
SNT
Senstar Technologies
3.52
2.08
144.44%
MG
Mistras Group
8.07
-0.27
-3.24%
NL
NL Industries
8.04
1.78
28.43%
ARLO
Arlo Technologies
13.79
1.49
12.11%
Napco Security Technologies Earnings Call Summary
Earnings Call Date:May 05, 2025
(Q3-2025)
| % Change Since: 16.19%|
Next Earnings Date:Sep 01, 2025
Earnings Call Sentiment Neutral
Napco Security Technologies demonstrated strong recurring revenue growth and maintained high margins on service revenues. However, significant declines in net sales, equipment sales, and net income, accompanied by increased operating expenses, present challenges. The company's debt-free status and successful new product launches position it well for future growth, but the current financial performance indicates areas of concern.Q3-2025 Updates
Positive Updates
Strong Recurring Revenue Growth
Recurring service revenue increased by 10.6% to $21.6 million in Q3, representing 49% of total revenue with a 91% gross margin. The annualized run rate for recurring revenue rose to $89 million.
Debt-Free Status and Strong Cash Reserves
Napco Security Technologies remains debt-free with substantial cash reserves, providing flexibility to invest in long-term growth strategies.
High Gross Margin on Service Revenue
The company maintained a high gross margin of 91% on service revenues, which is a key driver of profitability.
New Product Launches
Introduction of new cloud-based MVP remote access control platforms and next-generation StarLink radios at the ISC West Expo received positive feedback.
Improved Cash Flow from Operations
Cash provided by operating activities increased 25.4% to $38.9 million for the nine months ended March 31, 2025.
Negative Updates
Decline in Net Sales
Net sales for Q3 decreased 10.8% to $44 million, and for the nine months ended March 31, 2025, decreased 5.5% to $131 million compared to the previous year.
Decrease in Equipment Sales
Equipment sales for the quarter decreased 24.8% to $22.4 million due to reduced purchases by major distributors.
Lower Operating Income
Operating income for the quarter decreased 23.1% to $11.1 million compared to the same period last year.
Increased Operating Expenses
Selling, general, and administrative expenses increased by 16.9% in the quarter, primarily due to higher legal fees, insurance costs, and compensation.
Decreased Net Income
Net income for the quarter decreased 23.3% to $10.1 million or $0.28 per share compared to the same period last year.
Company Guidance
During Napco Security Technologies' Fiscal Q3 2025 earnings call, the company reported several key financial metrics and guidance for future performance. Napco achieved a 30% adjusted EBITDA margin and a 91% gross margin in service revenues, with service revenues increasing by 10.6% to $21.6 million. Recurring service revenue accounted for 49% of total revenue this quarter, with an annualized run rate of approximately $89 million, an increase from the $86 million run rate reported in January. Despite a decrease in net sales to $44 million, Napco remained debt-free with substantial cash reserves of $89.3 million, indicating strong cash flow. The company expects to continue expanding its high-margin recurring service revenue offerings, leveraging its strong product development pipeline and the competitive advantage of its manufacturing operations in the Dominican Republic. Additionally, the Board announced a sequential increase in its quarterly dividend to $0.14 per share, highlighting the company's commitment to returning value to shareholders.Napco Security Technologies Corporate Events
Executive/Board ChangesDividendsFinancial Disclosures
Napco Security Technologies Appoints New CFO Amidst Financial Updates
Neutral
May 5, 2025
On May 2, 2025, NAPCO Security Technologies announced the appointment of Andrew Vuono as Chief Financial Officer, effective May 6, 2025, while he continues as Chief Accounting Officer. The company also declared a cash dividend of $0.14 per share, payable on July 3, 2025. In its fiscal 2025 third quarter results, NAPCO reported a 10.8% decrease in net sales to $44 million, but a 10.6% increase in recurring service revenue to $21.6 million. The gross profit margin improved to 57.2%, though diluted EPS fell to $0.28. The company introduced a new cloud-based MVP Access platform at the International Security Conference in April 2025, expected to generate recurring revenue. Despite challenges from tariffs, NAPCO remains confident in its financial strength and competitive positioning due to its manufacturing locations in the Dominican Republic and USA.
Spark’s Take on NSSC Stock
According to Spark, TipRanks’ AI Analyst, NSSC is a Outperform.
Napco Security Technologies’ overall score reflects strong financial performance with high growth and profitability margins, but technical indicators show a bearish trend. The valuation is fair, providing some attractiveness. Despite mixed earnings results, the company’s solid cash position and innovation pipeline offer optimistic future prospects. However, declines in sales and increased expenses pose challenges.
To see Spark’s full report on NSSC stock, click here.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.