Small Cap Stocks Research: Napco Security (NSSC)

Napco Security Technologies (NASDAQ: NSSC) is a $308.65M maker of security products such as access control systems, door-locking, video surveillance and fire alarm systems.

Shares of Napco Security (NSSC) trade 24.75X Earnings, 3.37X Sales and 46.75X FCF and a clean balance sheet.

NSSC grew revenues 4.5%-6% the last few years annually and accelerating growth in 2019 with 9.6% topline growth forecasted and another 10.5% in 2020, while EPS that grew 36.7% in 2017 seen growing 32.9% and 40% the next two years. Napco Security posted record sales in Q3 and has 15 consecutive quarters of sales growth with recurring revenues +49%.  Insiders own 38% of the company.

NSSC is shifting its business to a more recurring revenue model and targeting the need for advanced school security.

NAPCO currently has an even split in commercial and residential solutions while its other brands like Marks, Continental Access and Alarm Lock are 100% commercial focused, resulting in an 80%/20% commercial/residential split for the company.  Its StarLink 3 series of communicators works with millions of existing competitor alarm systems providing a recurring revenue stream, a product that eliminates the need for a land line and instead uses mobile cellular networks, signal boost technology, and the iBride SmartPhone App.

The Home Automation market is seen growing to 16M residences in 2021 from 8M in 2016 for Smart Home security solutions.  NSSC is also targeting the rising incidences of school shootings with its LocDown systems.

NSSC is fundamentally sound and seeing accelerated growth with expanded market opportunities, a better margin profile, and a higher degree of recurring revenues.

$NSSC Napco Security Technologies Chart

napco security stock research analysis nssc outlook_november 2018

Twitter: @OptionsHawk

The author does not have a position in mentioned securities at the time of publication.  Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

Sign up for our FREE newsletter
and receive our best trading ideas and research