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 Yates

Forward View Consulting, 288 Crack Rock Road, Clintwood, VA 24228, USA

Nathan Yates has been fascinated by technology and finance since he was young. He was the kid devouring the business section of the newspaper (remember those?) while others read everything else. Nathan believes that the American economy is built from the bottom-up, meaning that small businesses and local nonprofits are the foundation of our nation's success. These organizations are the lifeblood of towns and cities across the U.S. Unfortunately, most consulting firms overlook companies or organizations that don't have eight-figure budgets. Nathan thought Forward View Consulting should be different. And we are. As Lead Consultant, Nathan works with each client to deliver only the best financial and/or website development services. Nathan's years of web design experience and his business degrees ensure that professional expertise is brought to each project. Our network of contacts can offer additional specialized guidance if needed. Before creating Forward View Consulting, Nathan worked for an independent equity research firm as a Research Associate covering the industrial and energy sectors. This work involved preparing quarterly 15-40 page reports on multi-billion dollar corporations along with timely analysis of M&A activity and industry-wide news. He also managed research distribution and the company's online presence. Nathan also spent a summer serving as a local financial adviser's Research Intern. Nathan earned a Bachelor's degree in Economics and Finance from Southern New Hampshire University, graduating summa cum laude. He then earned a Master's degree in Finance from Southern New Hampshire University, where he was named the Outstanding Student in his particular concentration. Now, Nathan is an adjunct professor teaching economics and finance for his alma mater. In his spare time, Nathan enjoys fishing, reading, time with family and serving as a volunteer webmaster for the Clintwood United Methodist Church.