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Napco Security (NSSC)
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Napco Security Technologies (NSSC) AI Stock Analysis

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NSSC

Napco Security Technologies

(NASDAQ:NSSC)

Rating:79Outperform
Price Target:
$32.00
▲(7.74%Upside)
Napco Security Technologies scores well due to its strong financial performance, highlighted by robust profitability and cash flow. Technical analysis shows short-term strength, though longer-term trends are uncertain. The valuation is fair, complementing stable dividend yields. The latest earnings call underscores growth in recurring revenues and strategic advantages but also flags concerns with declining net sales and rising expenses.
Positive Factors
Competitive Advantage
NAPCO manufactures its products in the Dominican Republic, putting it in a better position than competitors that source product from China and Mexico.
Market Position
NAPCO remains well-positioned to capitalize on favorable secular trends throughout commercial security.
Service Revenue Growth
NAPCO's business model has fundamentally shifted, with recurring service revenue now approaching 50% of sales, driving margin expansion.
Negative Factors
Demand Concerns
Continued sluggish demand in both the commercial security and door-locking device business.
Distributor Challenges
Equipment sales struggled due in particular to a $5.1 million combined downdraft at three of NAPCO's largest distributors.
Macro Uncertainty
Visibility remains weak, both from a macro perspective and as it relates to several key distributors.

Napco Security Technologies (NSSC) vs. SPDR S&P 500 ETF (SPY)

Napco Security Technologies Business Overview & Revenue Model

Company DescriptionNapco Security Technologies, Inc. is a leading manufacturer and provider of high-tech security solutions, primarily serving the security, school, business, and government sectors. The company offers a wide range of products including intrusion and fire alarms, access control systems, and video surveillance solutions. Napco is renowned for its innovation in security technology, providing integrated solutions that meet the diverse needs of its clients.
How the Company Makes MoneyNapco Security Technologies generates revenue primarily through the sale of its security products, which include intrusion alarms, fire alarms, access control systems, and video surveillance equipment. The company's key revenue streams are product sales to distributors, dealers, and integrators who then sell to end-users. Napco's products are also used in various sectors, including residential, commercial, institutional, industrial, and government markets. Additionally, the company benefits from recurring revenue through its service offerings, which include monitoring and support for their security systems. Partnerships with distributors and security system dealers are significant contributors to its earnings, providing a broad market reach and facilitating the sale of its comprehensive security solutions.

Napco Security Technologies Earnings Call Summary

Earnings Call Date:May 05, 2025
(Q3-2025)
|
% Change Since: 25.53%|
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 Financial Statement Overview

Summary
Napco Security Technologies exhibits robust financial health with strong profitability, minimal leverage, and efficient cash flow conversion. The company's income statement highlights high profit margins, while its balance sheet shows minimal debt and excellent equity utilization. Cash flow metrics indicate strong cash generation, supporting continued financial stability.
Income Statement
88
Very Positive
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.
Balance Sheet
84
Very Positive
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.
Cash Flow
90
Very Positive
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.
BreakdownTTMJun 2024Jun 2023Jun 2022Jun 2021Jun 2020
Income Statement
Total Revenue181.23M188.82M170.00M143.59M114.03M101.36M
Gross Profit102.08M101.75M73.23M59.16M50.15M43.59M
EBITDA49.81M55.98M32.26M20.00M19.63M14.16M
Net Income45.31M49.82M27.13M19.60M15.41M7.79M
Balance Sheet
Total Assets190.86M207.75M166.65M148.58M123.29M105.84M
Cash, Cash Equivalents and Short-Term Investments89.30M97.72M66.75M46.80M40.22M18.25M
Total Debt5.38M5.51M5.69M7.07M10.99M11.02M
Total Liabilities29.32M28.86M26.48M34.78M30.06M27.94M
Stockholders Equity161.55M178.89M140.17M113.79M93.24M77.90M
Cash Flow
Free Cash Flow50.81M43.77M21.74M6.85M21.98M8.69M
Operating Cash Flow53.24M45.37M24.70M8.33M22.99M10.31M
Investing Cash Flow14.25M-3.15M-28.26M-1.56M-6.43M-1.61M
Financing Cash Flow-49.59M-12.83M-2.21M155.00K0.001.53M

Napco Security Technologies Technical Analysis

Technical Analysis Sentiment
Positive
Last Price29.70
Price Trends
50DMA
28.93
Positive
100DMA
26.08
Positive
200DMA
30.55
Positive
Market Momentum
MACD
0.57
Positive
RSI
58.32
Neutral
STOCH
35.37
Neutral
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 29.7 is below the 20-day moving average (MA) of 30.23, above the 50-day MA of 28.93, and below the 200-day MA of 30.55, indicating a bullish trend. The MACD of 0.57 indicates Positive momentum. The RSI at 58.32 is Neutral, neither overbought nor oversold. The STOCH value of 35.37 is Neutral, 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 (65)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
79
Outperform
$1.06B24.8827.48%1.73%-1.05%-2.78%
79
Outperform
$104.27M65.29-3.47%
73
Outperform
$301.80M16.8011.35%13.06%-9.51%-26.61%
73
Outperform
$1.70B-21.34%0.27%-18.75%
69
Neutral
$324.35M5.3615.93%5.12%-6.25%442.27%
65
Neutral
$11.08B15.705.19%2.15%3.13%-24.94%
64
Neutral
$260.35M17.687.70%-2.09%
* Industrials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
NSSC
Napco Security Technologies
29.70
-24.68
-45.38%
CIX
Compx International
24.50
1.71
7.50%
SNT
Senstar Technologies
4.44
2.78
167.47%
MG
Mistras Group
8.26
-1.72
-17.23%
NL
NL Industries
6.64
0.94
16.49%
ARLO
Arlo Technologies
16.41
0.92
5.94%

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.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

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.Date of analysis: Jun 25, 2025