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1. Company Snapshot

1.a. Company Description

Napco Security Technologies, Inc.develops, manufactures, and sells electronic security products in the United States and internationally.The company offers access control systems, door-locking products, intrusion and fire alarm systems, and video surveillance systems for commercial, residential, institutional, industrial, and governmental applications.


Its access control systems include various types of identification readers, control panels, PC-based computers, and electronically activated door-locking devices; and door locking devices comprise microprocessor-based electronic door locks with push button, card readers and bio-metric operation, door alarms, mechanical door locks, and simple dead bolt locks.The company's alarm systems include automatic communicators, cellular communication devices, control panels, combination control panels/digital communicators and digital keypad systems, fire alarm control panels, and area detectors; and video surveillance systems comprise video cameras, control panels, video monitors, or PCs. It also buys and resells various identification readers, video cameras, PC-based computers, and peripheral equipment for access control and video surveillance systems; offers school security products; and markets peripheral and related equipment manufactured by other companies.The company markets and sells its products primarily to independent distributors, dealers, and installers of security equipment.


Napco Security Technologies, Inc.was founded in 1969 and is headquartered in Amityville, New York.

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1.b. Last Insights on NSSC

Napco Security Technologies' recent performance was negatively impacted by a sharp decline in second-quarter 2025 earnings, revealing problems with its distribution network. The news reignited concerns about the company's sales practices, previously raised by a research report last September. Additionally, allegations of materially misleading business information issued to the investing public have been raised, leading to investigations by law firms. These issues have likely contributed to the company's recent struggles.

1.c. Company Highlights

2. NAPCO Security Technologies Delivers Record Q1 Revenue and Earnings

NAPCO Security Technologies reported a record fiscal first quarter 2026 revenue of $49.2 million, a 12% year-over-year increase driven by a 12% rise in equipment sales to $25.7 million and an 11.6% increase in recurring revenue to $23.5 million. The company's gross margin for recurring services revenue was 90.3%, while equipment gross margin improved to 26%. Net income rose 9% to a Q1 record of $12.2 million, or 25% of revenue, with earnings per share (EPS) of $0.34, beating estimates of $0.32. Adjusted EBITDA was up 21% with an adjusted EBITDA margin of 30.4%.

Publication Date: Nov -29

📋 Highlights
  • Revenue Growth:: Fiscal Q1 2026 revenue hit $49.2M (+12% YoY), driven by $25.7M equipment sales (+12%) and $23.5M recurring revenue (+11.6%).
  • Recurring Revenue Strength:: Recurring services achieved a $95M annual run rate with 90.3% gross margin, outperforming equipment’s 26% margin.
  • Profitability Expansion:: Operating income rose 15% to $13.6M; net income hit $12.2M (+9%), representing 25% of revenue, with adjusted EBITDA up 21% to 30.4% margin.
  • Strong Liquidity:: $106M cash balance with no debt, supporting growth initiatives and potential shareholder returns like the $0.14/share quarterly dividend.
  • Strategic Partnerships:: Collaboration with ADI (115 branches) drives intrusion equipment sales, while MVP platform integration aims to expand recurring revenue through $3/door cloud access control.

Revenue Growth Drivers

The growth in equipment revenue was driven by both volume and price increases, with approximately 60% of the 12% increase due to volume and 40% due to pricing. Locking product sales were $17,083,000, up from $13,854,000 in the same quarter last year. The company expects the locking segment to continue to perform well, with a strong sell-through and good channel conditions. The recurring revenue service now has a prospective annual run rate of approximately $95 million.

Margin Pressures and Mitigation Strategies

Service margins declined by 80 basis points year-over-year, primarily due to the introduction of a triple carrier radio, which requires the company to buy minutes to support T-Mobile, and pricing pressure from large dealers. However, the company expects to offset this pressure by increasing its radio charges to cover the additional costs. The company is studying a price increase to account for T-Mobile compatibility, which will add a cost currently not compensated for.

Growth Prospects and Opportunities

The company is optimistic about its growth prospects, citing its strong balance sheet, diversified distribution base, and investments in automation and innovation, including its MVP cloud-based access control platform. NAPCO's school security solutions, including Trilogy and ArchiTech lock sets, are secure, scalable, and aligned with the Partner Alliance for Safer Schools program standards. The company believes that its locking business will start to contribute to recurring service revenue growth in fiscal '27, and that it has the potential to be meaningful.

Valuation and Return Metrics

With a P/E Ratio of 33.7, P/B Ratio of 8.68, and P/S Ratio of 7.93, the company's valuation multiples suggest a premium for its growth prospects. The company's ROE of 25.42% and ROIC of 23.04% indicate strong profitability. The Dividend Yield is 1.31%, and the Free Cash Flow Yield is 3.57%. The Net Debt / EBITDA ratio is -1.6, highlighting the company's net cash position.

3. NewsRoom

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NAPCO Security Technologies Releases ISC East 2025 Recap Video Highlighting Booth Engagement

Nov -24

Source: prnewswire.com

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NAPCO to Showcase New Products at the International Security Conference & Exposition

Nov -17

Source: prnewswire.com

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Aviva PLC Lowers Stock Holdings in NAPCO Security Technologies, Inc. $NSSC

Nov -14

Source: defenseworld.net

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4 Security & Safety Stocks to Consider on Promising Industry Trends

Nov -06

Source: zacks.com

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Envestnet Asset Management Inc. Sells 69,326 Shares of NAPCO Security Technologies, Inc. $NSSC

Nov -06

Source: defenseworld.net

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Napco Security Technologies, Inc. (NSSC) Q1 2026 Earnings Call Transcript

Nov -03

Source: seekingalpha.com

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NAPCO Security Technologies, Inc. Reports Fiscal Q1 Results

Nov -03

Source: prnewswire.com

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Bessemer Group Inc. Has $439,000 Stock Holdings in NAPCO Security Technologies, Inc. $NSSC

Nov -03

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (11.02%)

6. Segments

Door Locking Devices

Expected Growth: 12.0%

The 12.0% growth of Door Locking Devices from Napco Security Technologies, Inc. is driven by increasing demand for smart home security solutions, rising adoption of IoT-enabled devices, and growing concerns about home safety and security. Additionally, advancements in technology, such as biometric authentication and wireless connectivity, are also contributing to the segment's growth.

Services

Expected Growth: 10.0%

Napco Security Technologies' 10.0% growth is driven by increasing demand for security solutions, government initiatives for smart cities, and rising adoption of IoT-based security systems. Additionally, the company's focus on innovation, strategic partnerships, and expansion into new markets contribute to its growth momentum.

Intrusion and Access Alarm Products

Expected Growth: 11.0%

Napco Security Technologies' 11.0% growth in Intrusion and Access Alarm Products is driven by increasing demand for smart home security systems, government initiatives for infrastructure security, and rising adoption of IoT-based security solutions. Additionally, the company's focus on innovation, strategic partnerships, and expanding distribution channels contribute to its growth momentum.

7. Detailed Products

Intrusion Systems

Napco Security Technologies offers a range of intrusion systems, including control panels, keypads, and sensors, designed to provide reliable and efficient security solutions for residential and commercial applications.

Access Control Systems

Napco's access control systems provide secure and convenient entry management solutions for various industries, including education, healthcare, and government.

Video Surveillance Systems

Napco's video surveillance systems offer high-quality cameras, recorders, and software, designed to provide clear video evidence and enhance security monitoring.

Fire Alarm Systems

Napco's fire alarm systems provide early warning detection and notification systems to protect people and property from fire hazards.

Door Security and Hardware

Napco offers a range of door security and hardware products, including locks, hinges, and door closers, designed to provide secure and durable door solutions.

Wireless Security Systems

Napco's wireless security systems provide flexible and reliable security solutions for residential and commercial applications, eliminating the need for wiring.

8. Napco Security Technologies, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Napco Security Technologies, Inc. faces moderate threat from substitutes, as there are alternative security solutions available in the market, but the company's strong brand reputation and customer loyalty mitigate this threat to some extent.

Bargaining Power Of Customers

Napco Security Technologies, Inc. has a diverse customer base, which reduces the bargaining power of individual customers, and the company's strong relationships with its customers also limit their bargaining power.

Bargaining Power Of Suppliers

Napco Security Technologies, Inc. has a moderate dependence on its suppliers, and while there are some alternative suppliers available, the company's strong relationships with its suppliers and its ability to negotiate prices mitigate this threat to some extent.

Threat Of New Entrants

Napco Security Technologies, Inc. operates in a highly regulated industry, and the barriers to entry are high, which reduces the threat of new entrants, and the company's strong brand reputation and customer loyalty also make it difficult for new entrants to gain traction.

Intensity Of Rivalry

Napco Security Technologies, Inc. operates in a highly competitive industry, and the intensity of rivalry is high, with many established players competing for market share, and the company needs to continuously innovate and improve its products and services to stay ahead of the competition.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 3.90%
Debt Cost 11.45%
Equity Weight 96.10%
Equity Cost 11.45%
WACC 11.45%
Leverage 4.06%

11. Quality Control: Napco Security Technologies, Inc. passed 9 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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NL Industries

A-Score: 6.1/10

Value: 8.3

Growth: 4.8

Quality: 8.4

Yield: 10.0

Momentum: 1.0

Volatility: 4.0

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Napco Security Technologies

A-Score: 5.0/10

Value: 1.2

Growth: 8.8

Quality: 8.6

Yield: 1.0

Momentum: 6.0

Volatility: 4.7

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Arlo Technologies

A-Score: 4.3/10

Value: 4.9

Growth: 5.7

Quality: 3.7

Yield: 0.0

Momentum: 8.5

Volatility: 3.3

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Mistras

A-Score: 4.2/10

Value: 6.8

Growth: 4.3

Quality: 5.5

Yield: 0.0

Momentum: 3.5

Volatility: 5.3

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GEO Group

A-Score: 4.2/10

Value: 5.1

Growth: 2.3

Quality: 5.0

Yield: 0.0

Momentum: 9.0

Volatility: 3.7

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VerifyMe

A-Score: 2.9/10

Value: 7.4

Growth: 6.4

Quality: 3.2

Yield: 0.0

Momentum: 0.5

Volatility: 0.0

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

41.31$

Current Price

41.31$

Potential

-0.00%

Expected Cash-Flows