Last Update 22 Dec 25

NSSC: Accelerating Equipment Sales Should Sustain Outperformance Into Fiscal 2026

Analysts have modestly raised their price target on Napco Security Technologies to $50.00, citing the company’s repeated quarterly beats, accelerating equipment sales growth, and an increasingly favorable setup into FY26 as key drivers of renewed near term and long term conviction.

Analyst Commentary

Bullish Takeaways

Bullish analysts highlight the third consecutive quarterly beat as evidence that Napco is executing well against expectations, supporting a higher valuation multiple.
Accelerating equipment sales growth is viewed as a key driver of both near term revenue upside and longer term earnings power, underpinning the move to a $50 price target.
Recent investor meetings with senior management left bullish analysts encouraged about the company s positioning and visibility into FY26, reinforcing confidence in sustained growth.
Easy year over year comparisons over the next two quarters are seen as a catalyst for continued outperformance, which could attract incremental institutional interest and further rerating.

Bearish Takeaways

Bearish analysts caution that the shares now embed a meaningful amount of future growth, leaving less margin for error if equipment sales momentum slows.
There is concern that outperformance driven by easy upcoming comparisons may prove transitory, potentially limiting the durability of recent beats.
Some see execution risk around sustaining elevated growth into FY26, particularly if macro conditions soften or competitive intensity increases.
Valuation sensitivity remains a watchpoint, as any sign of decelerating order trends or weaker than expected margins could trigger multiple compression from current levels.

What's in the News

Napco Security Technologies will showcase its latest innovations at ISC East 2025 in New York City, highlighting a unified MVP ecosystem that integrates access control panels, electronic locks, and credential readers with its MVP Cloud Platform to address security needs across education, healthcare, commercial, and government markets (Key Developments).
The company plans to use ISC East 2025 to drive new hardware sales and recurring monthly revenue opportunities for its dealer network, locksmiths, and integrators, positioning the unified MVP solution as a margin and growth driver for both partners and shareholders (Key Developments).
Napco will introduce new TriCarrier Cellular StarLink Intrusion Communicators, offering a universal migration path from legacy POTS lines and expanding its multi SIM cellular communications portfolio beyond commercial fire applications (Key Developments).
New XK5 slimline keypad and 2R touchscreen interfaces will be showcased as upgrade options for tens of thousands of existing Gemini 8 255 zone systems across North America, giving dealers straightforward migration paths while modernizing user experience (Key Developments).
The company reported that from July 1, 2025 to September 30, 2025, it repurchased no additional shares, completing a prior buyback of 640,259 shares for $16.15 million, or about 1.76% of shares outstanding, under the program announced November 4, 2024 (Key Developments).

Valuation Changes

Fair Value Estimate remains unchanged at approximately $48.83 per share, indicating no material shift in intrinsic value assumptions.
Discount Rate has held steady at about 8.40%, reflecting an unchanged perceived risk or cost of capital.
Revenue Growth has essentially held steady at roughly 10.77% annually, suggesting no meaningful change in top line growth expectations.
Net Profit Margin remains effectively unchanged at around 25.72%, indicating stable profitability assumptions.
Future P/E multiple has edged down slightly from about 31.44x to 31.43x, implying a marginally lower valuation multiple applied to forward earnings.

Growth in high-margin recurring service revenue and expansion into new markets support stronger margins and more predictable long-term earnings.
Ongoing digital innovation and pricing actions, backed by a strong balance sheet, drive product innovation, gross margin recovery, and long-term growth.
Softness in hardware demand, reliance on recurring revenue from one product, and external risks threaten earnings growth, margins, and long-term revenue resilience.

Catalysts

About Napco Security Technologies

Develops, manufactures, and sells electronic security systems for commercial, residential, institutional, industrial, and governmental applications in the United States and internationally.What are the underlying business or industry changes driving this perspective?

Persistent growth in high-margin, recurring monthly service revenue-driven by increased deployments of StarLink fire radios and the expected ramp-up of new cloud-based platforms like MVP-positions Napco to expand margins and achieve more stable, predictable earnings over the long term.
Broader societal demand for robust security and access control, particularly in verticals like schools and commercial buildings, continues to open new addressable markets for Napco's integrated, scalable solutions, supporting revenue acceleration and customer base diversification.
Napco is capitalizing on industry-wide digital transformation, evidenced by ongoing R&D investment in wireless and cloud-enabled products (e.g., the next-gen MVP platform and expanded radio communication offerings), which enhances product innovation, market share gains, and topline growth.
Pricing actions taken in 2025-including an 8.5% tariff-offset increase and an annual 5% adjustment-are expected to be fully realized in fiscal 2026, providing a near-term lift to equipment sales revenue and helping restore/improve gross margins following recent cost headwinds.
Operational discipline, strong cash generation and a debt-free balance sheet enable Napco to reinvest in innovation, pursue strategic acquisitions, and flexibly return capital to shareholders-supporting long-term earnings growth and valuation recovery.

Napco Security Technologies Earnings and Revenue Growth

Napco Security Technologies Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Napco Security Technologies's revenue will grow by 8.7% annually over the next 3 years.
Analysts assume that profit margins will increase from 23.9% today to 24.8% in 3 years time.
Analysts expect earnings to reach $57.8 million (and earnings per share of $1.62) by about September 2028, up from $43.4 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 28.2x on those 2028 earnings, down from 32.9x today. This future PE is greater than the current PE for the US Electronic industry at 23.9x.
Analysts expect the number of shares outstanding to decline by 2.8% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.15%, as per the Simply Wall St company report.

Napco Security Technologies Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Equipment sales declined 15.7% year-over-year and showed lower gross margins (24% vs. 29% prior year), indicating prolonged softness in hardware demand and pricing power; continued weakness here or increased reliance on price-driven demand could further compress revenues and gross margins if pull-forward effects from tariffs prove temporary rather than structural.
Operating income and net income both decreased substantially year-over-year (operating income down 14%, net income down 13%), and while recurring revenue is growing, the contraction in hardware profitability and increased SG&A/R&D spending threatens overall earnings momentum and net margin resilience if top-line growth remains muted.
The company remains heavily reliant on its StarLink Fire radio platform for recurring revenue growth, which exposes it to technology risk and the threat of rapid obsolescence from new, integrated or DIY competitors offering alternative smart security or cloud-based solutions, potentially eroding future recurring revenue and long-term revenue growth.
Tariff-related uncertainties, cost inflation, and industry-wide channel inventory destocking introduce ongoing risk to demand visibility and pricing; if tariff relief proves temporary or global economic conditions weaken, Napco could see pressure on both revenue and margin from reduced commercial/institutional spending.
Although the company reports strong internal controls after past accounting issues, future risks around compliance, audit, or financial reporting could re-emerge, which may impact investor confidence, increase regulatory/compliance costs, and depress future valuation multiples and access to capital, thus affecting long-term earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $40.333 for Napco Security Technologies based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $45.0, and the most bearish reporting a price target of just $36.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $233.3 million, earnings will come to $57.8 million, and it would be trading on a PE ratio of 28.2x, assuming you use a discount rate of 8.2%.
Given the current share price of $40.1, the analyst price target of $40.33 is 0.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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