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Napco Security Technologies (NSSC)
NASDAQ:NSSC
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Napco Security Technologies
(NASDAQ:NSSC)
68Neutral
Positive Factors
Financial Performance
The strong balance sheet and buyback should help create a backstop in the near term.
Recurring Revenue
Encouraged by the potential earnings leverage in the model that will be unlocked as the recurring revenue stream ramps.
Negative Factors
Earnings
EPS came in well below consensus, declining 18% year-over-year versus expectations for a 1% decline.
Equipment Revenue
NSSC shares sank 27% after the company posted weaker than expected results on sharply lower equipment revenue.
Market Conditions
Ongoing macro concerns and more guarded commentary from distributors.
Napco Security Technologies (NSSC) vs. S&P 500 (SPY)
Market Cap
$840.87M
Dividend Yield1.41%
Average Volume (3M)452.15K
Price to Earnings (P/E)17.7
Beta (1Y)1.54
Revenue Growth5.14%
EPS Growth12.03%
CountryUS
Employees1,070
SectorIndustrials
Sector Strength66
IndustrySecurity & Protection Services
Share Statistics
EPS (TTM)1.30
Shares Outstanding36,401,420
10 Day Avg. Volume433,854
30 Day Avg. Volume452,155
Financial Highlights & Ratios
PEG Ratio1.47
Price to Book (P/B)N/A
Price to Sales (P/S)4.67
Price to Cash Flow (P/CF)16.10
P/FCF Ratio17.60
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$30.40Price Target Upside31.60% Upside
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 exhibits strong financial health with robust revenue growth, high profitability margins, and a low debt position, supported by efficient cash flow management. These factors collectively highlight a well-managed company poised for sustainable growth.Income Statement
Napco Security Technologies has shown strong revenue growth, with a 30% increase from 2022 to 2023 and a consistent upward trajectory in profitability over the years. The TTM (Trailing-Twelve-Months) data indicates healthy profit margins, with a Gross Profit Margin of 55.4% and a Net Profit Margin of 25.9%. The company's EBIT and EBITDA margins are robust at 27.6% and 28.2%, respectively. These figures highlight significant strength in operational efficiency and cost management.88
Very Positive
Balance Sheet
The balance sheet of Napco Security Technologies is strong, with a low Debt-to-Equity Ratio of 0.03, indicating minimal financial leverage and risk. The Return on Equity (ROE) has improved significantly, reflecting enhanced profitability relative to shareholders' equity. The Equity Ratio of 86% shows a solid financial foundation, ensuring stability and resilience against potential liabilities.85
Very Positive
Cash Flow
The company has demonstrated substantial free cash flow growth, with a notable increase in both operating and free cash flows. The Operating Cash Flow to Net Income Ratio is an impressive 1.08, indicating effective cash generation from operations. The Free Cash Flow to Net Income Ratio is 1.02, reflecting the company's ability to convert earnings into cash efficiently, which bodes well for future investments and shareholder returns.83
Very Positive
| Breakdown | |||||
| TTM | Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 | Jun 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 186.53M | 188.82M | 170.00M | 143.59M | 114.03M | 101.36M | Gross Profit |
| 103.43M | 101.75M | 73.23M | 59.16M | 50.15M | 43.59M | EBIT |
| 51.48M | 53.82M | 30.32M | 18.23M | 17.34M | 10.81M | EBITDA |
| 52.57M | 55.98M | 32.26M | 20.00M | 19.63M | 14.16M | Net Income Common Stockholders |
| 48.38M | 49.82M | 27.13M | 19.60M | 15.41M | 7.79M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 99.19M | 97.72M | 66.75M | 46.80M | 40.22M | 18.25M | Total Assets |
| 202.68M | 207.75M | 166.65M | 148.58M | 123.29M | 105.84M | Total Debt |
| 5.42M | 5.51M | 5.69M | 7.07M | 10.99M | 11.02M | Net Debt |
| -80.60M | -59.83M | -30.27M | -34.66M | -23.81M | -7.23M | Total Liabilities |
| 28.46M | 28.86M | 26.48M | 34.78M | 30.06M | 27.94M | Stockholders Equity |
| 174.23M | 178.89M | 140.17M | 113.79M | 93.24M | 77.90M |
| Cash Flow | Free Cash Flow | ||||
| 49.47M | 43.77M | 21.74M | 6.85M | 21.98M | 8.69M | Operating Cash Flow |
| 52.20M | 45.37M | 24.70M | 8.33M | 22.99M | 10.31M | Investing Cash Flow |
| 16.02M | -3.15M | -28.26M | -1.56M | -6.43M | -1.61M | Financing Cash Flow |
| -29.51M | -12.83M | -2.21M | 155.00K | 0.00 | 1.53M |
Napco Security Technologies Technical Analysis
Negative
23.10
Price Trends
27.23
Negative
32.04
Negative
39.36
Negative
Market Momentum
-0.86
Negative
33.46
Neutral
16.51
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NSSC, the sentiment is Negative. The current price of 23.1 is below the 20-day moving average (MA) of 24.41, below the 50-day MA of 27.23, and below the 200-day MA of 39.36, indicating a bearish trend. The MACD of -0.86 indicates Negative momentum. The RSI at 33.46 is Neutral, neither overbought nor oversold. The STOCH value of 16.51 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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 (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $42.19B | 115.23 | 19.10% | ― | 33.32% | 111.64% | |
78 Outperform | $7.10B | 15.57 | 14.41% | 2.72% | -13.19% | 10.03% | |
74 Outperform | $2.77B | 24.43 | 17.54% | ― | 6.59% | 53.89% | |
68 Neutral | $840.87M | 17.71 | 29.13% | 1.41% | 5.14% | 12.03% | |
68 Neutral | $1.26B | 10.93 | 12.80% | 3.60% | 0.20% | 51.62% | |
66 Neutral | $2.64B | 25.24 | 3.83% | ― | 8.31% | -49.90% | |
62 Neutral | $8.05B | 13.61 | 3.91% | 3.11% | 3.81% | -13.91% |
* Industrials Sector Average
Performance Comparison
NSSC
Napco Security Technologies
23.10
-16.08
-41.04%
SCS
Steelcase
11.10
-1.53
-12.11%
AXON
Axon Enterprise
534.95
223.58
71.81%
ALRM
Alarm
55.81
-15.35
-21.57%
ADT
Adt
8.10
1.80
28.57%
REZI
Resideo Technologies
17.82
-4.23
-19.18%
Napco Security Technologies Earnings Call Summary
Earnings Call Date: Feb 3, 2025 | % Change Since: -36.75% | Next Earnings Date: May 12, 2025
Earnings Call Sentiment Neutral
The earnings call revealed a mixed performance for NAPCO Security Technologies. While the company experienced strong growth in recurring revenue and maintained a solid financial position with no debt, it faced significant challenges with a decline in equipment sales and net sales, as well as increased operating expenses. The company's innovation pipeline and strong cash position provide optimism for future growth, but the current period's performance was hindered by external timing issues and distributor decisions.Highlights
Increase in Recurring Revenue
Recurring revenue increased by 15% in Q2 to $21.2 million, contributing to a gross margin of 91% and leading to a 400 basis-point improvement in total gross margin to 57%.
Strong Financial Position
The company has $99.2 million in cash and cash equivalents, with no debt as of December 31, 2024. Cash provided by operating activities for the three months increased by 80% to $13.5 million.
Innovation and Product Pipeline
The company is set to launch new offerings expanding recurring revenue opportunities, including the MVP hosted access system and Prima by NAPCO, aiming to address residential and small business markets.
Lowlights
Decline in Equipment Sales
Equipment sales for the quarter decreased by 25% to $21.7 million due to reduced sales from two large distributors and timing issues with certain projects.
Decrease in Net Sales and Operating Income
Net sales for the quarter decreased by 9.7% to $42.9 million, and operating income decreased by 19% to $11.2 million compared to the same period last year.
Increased Operating Expenses
Research and development costs increased by 22% to $3.1 million, and selling, general, and administrative expenses increased by 18% to $10.2 million.
Company Guidance
During the fiscal second quarter of 2025, NAPCO Security Technologies reported mixed results, with a 15% increase in recurring revenue reaching $21.2 million, which contributed to a gross margin of 91% and improved the overall gross margin by 400 basis points to 57%. Despite these gains, net sales decreased by 9.7% to $42.9 million compared to the same period the previous year, primarily due to timing issues with distributors and specific large locking projects. Equipment sales saw a significant decline of 25% to $21.7 million, mainly attributed to reduced purchases by two major distributors. The company's adjusted EBITDA margin fell to 28% from 32% the prior year. Despite these challenges, NAPCO remains focused on growth opportunities, particularly in wireless fire and intrusion alarms, school security solutions, and recurring revenue services, with an optimistic outlook bolstered by a strong innovation pipeline and strategic focus on industry trends.Napco Security Technologies Corporate Events
Business Operations and StrategyFinancial Disclosures
Napco Security Reports Mixed Q2 Fiscal 2025 Results
Neutral
Feb 3, 2025
For the second quarter of fiscal 2025, NAPCO Security Technologies reported mixed financial results. Net sales decreased by 9.7% year-over-year to $43 million, impacted by reduced sales to major distributors and the timing of custom locking product projects. Despite this, the company saw a 14.4% increase in recurring service revenue to $21.2 million and improved its gross profit margin to 57.0%. The company’s school and classroom security sales continue to grow, highlighted by a contract with the Pasadena Unified School District. NAPCO introduced new products like the Prima All-in-One Panel and the MVP Access platform, expected to enhance market penetration and generate recurring revenue. The company remains optimistic about improving its financial performance in the latter half of fiscal 2025.
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.