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Is There Value In NAPCO Security Technologies?

Summary

  • NSSC is a pure-play small-cap security products company. It has been in existence since 1969.
  • The company's EPS could easily double in three years due to NSSC's transformation ongoing efforts.
  • We don't see a reason to buy the shares now due to valuation concerns. Nonetheless, we see NSSC as a prime takeover candidate in 2-3 years.

Prepared by:

Nathan Yates, M.S.F.
Owner and Lead Research Analyst

What We Have to Say:

On Thursday, November 13th, we had the pleasure of an initial conversation with NAPCO Security Technologies (NASDAQ: NSSC) CEO Richard Soloway and SVP of Operations and Finance Kevin Buchel. We thoroughly enjoyed the discussion and appreciate the introduction made by KCSA Strategic Communications. Forward View is always happy to speak with such professional executives.

NSSC is a small-cap company that manufactures intrusion alert devices, fire alarms and access control/door-locking systems for residential and commercial applications. The company also provides related monitoring services and support. Products are sold under NSSC'S own brands and under private-label agreements with companies such as ADT. FY2014 revenues were almost $74.4M (up 4.2% y/y) with $4.3M in operating income (up 16.1% y/y) and diluted EPS of $0.18 (up $0.02 y/y). With 19.43M shares outstanding (diluted) and a $4.43 share price, market cap is just over $85.5M. See the chart below for some perspective:

Nathan YatesComment