Needham raised the price target for Napco Security Technologies, Inc. (NASDAQ: NASDAQ:NSSC) to $57.00, up from the previous $52.00, while maintaining a Buy rating on the stock.
The company's shares experienced a pullback on Monday, despite reporting fourth-quarter earnings that exceeded expectations. Napco's revenues saw a 13% year-over-year increase, surpassing the consensus forecast of a 12% rise.
The growth in earnings per share (EPS) for the quarter was notable, jumping 28% compared to the same period last year. This increase was attributed to improved gross margins, which were helped by higher equipment margins and continued strength in recurring revenues.
Equipment revenue itself grew by 5% year-over-year, buoyed by a significant 21% increase in Locking sales, which helped to counterbalance a 21% decline in Intrusion & Access Alarm (NASDAQ:ALRM) Products.
Napco's Service segment, which represents the company's recurring revenue, surged 27% year-over-year, outperforming the consensus estimate of 21%. This segment's annual run rate based on July 2024 revenue reached $84 million, an increase from the $81 million rate projected in April.
In light of these results, Needham has adjusted its fiscal year 2025 estimates upward and introduced a forecast for fiscal year 2026, anticipating a 15% growth in revenue and a 22% increase in EPS. The firm's stance on Napco remains positive, reaffirming their Buy recommendation.
InvestingPro Insights
Following Needham's updated outlook on Napco Security Technologies, Inc. (NASDAQ: NSSC), current data from InvestingPro provides additional context for investors considering the stock. With a market capitalization of $1.75 billion, Napco is navigating the market with a robust financial position, as indicated by a P/E ratio of 41.4, which adjusts to 35.07 when considering the last twelve months as of Q4 2024. This valuation is complemented by a PEG ratio of 0.4, suggesting that the stock may be trading at a low price relative to near-term earnings growth, a noteworthy InvestingPro Tip for growth-oriented investors.
Despite recent price volatility, with a 13.59% drop over the past week, Napco has demonstrated significant long-term returns, with an 110.94% increase over the past year. The company's financial health is further evidenced by its revenue growth of 11.07% in the last twelve months, reaching $188.82 million, which supports the positive sentiment echoed by Needham. Moreover, Napco's liquid assets exceed short-term obligations, providing financial flexibility. For investors seeking detailed analysis, InvestingPro offers additional insights, with 14 more InvestingPro Tips available, including metrics on profitability and valuation multiples, which can be found at https://www.investing.com/pro/NSSC.
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