On Wednesday, Lake Street Capital Markets adjusted its outlook on Napco Security Technologies, Inc. (NASDAQ:NSSC) shares, increasing the price target to $60 from the previous $54 while maintaining a Buy rating on the stock.
The firm's analyst highlighted Napco's continued trajectory towards significant growth in both the top and bottom lines, emphasizing the company's progress toward achieving its financial goals. These include $150 million in equipment revenue, $150 million in recurring revenue, and a 45% adjusted EBITDA margin.
The analyst noted that the market might be underestimating Napco's earnings potential as it advances towards these financial targets. The expectation is that the company's stock will experience further multiple expansions as the market gains a better understanding of Napco's growth model. The analyst's confidence is bolstered by Napco's recent performance, which includes three consecutive quarters of results surpassing expectations following a restatement issue last year.
For the first two months of the fourth fiscal quarter (FY4Q), which traditionally has been a strong period for the company, Napco is believed to be on track with its goals. The consensus forecasts a 1.6% sequential growth for the quarter, which is conservative compared to historical data.
Since fiscal year 2000, the median growth rate for the fourth fiscal quarter has been 24.9%, with an average of 24.4%. The predicted 1.6% growth would mark the second-lowest rate in this timeframe, with the lowest being a 12.3% decrease in FY20. While Lake Street does not anticipate a growth rate above 20% for this quarter, the firm suggests that the current consensus may be unduly modest.
In conclusion, Lake Street Capital Markets reiterated its Buy rating for Napco Security Technologies and raised the price target, signaling a positive outlook for the company's stock performance in the near future. The firm expects Napco to continue its solid performance and potentially exceed market expectations.
In other recent news, Napco Security Technologies has been making significant strides in its financial performance and market position. TD Cowen initiated coverage on Napco, setting a Buy rating with a price target of $60.00, highlighting the company's attractive manufacturing footprint, absence of debt, and high free cash flow conversion rate. DA Davidson increased its price target on Napco to $53.00 following strong fiscal third-quarter results, particularly in Recurring Services Revenue and gross margins.
In addition, Needham raised its price target for Napco to $52.00 after the company reported a year-over-year revenue increase of 13% and a higher than anticipated earnings per share in its fiscal third-quarter 2024 results. The company's Service business, generating recurring revenue, marked a significant increase of 29% year-over-year, surpassing the consensus estimate.
Lastly, Napco announced a significant milestone of achieving record sales for the 14th consecutive quarter with a reported $49.3 million in fiscal Q3 of 2024. The company's strategic initiatives in various sectors have contributed to its robust growth, particularly in recurring revenue subscriptions, which have reached an annual run rate of $81 million as of April 2024. These are the recent developments that have been shaping Napco's financial landscape.
InvestingPro Insights
As Napco Security Technologies (NASDAQ:NSSC) strides toward achieving its ambitious financial targets, recent data from InvestingPro underscores several key metrics that may interest investors. Notably, the company holds more cash than debt on its balance sheet, which is a reassuring sign of financial stability. Additionally, Napco is trading at a low P/E ratio relative to near-term earnings growth, with a P/E ratio of 39.06 and a PEG ratio of just 0.42 for the last twelve months as of Q3 2024. This suggests that the stock may be undervalued given its growth prospects.
Investors may also take note of the company's strong performance trends. Napco has demonstrated a robust 23.75% price total return over the last three months and an impressive 55.18% over the last six months. Such momentum is indicative of investor confidence and the company's operational success. For those looking to delve deeper into Napco's financials and stock potential, InvestingPro offers additional insights, including 16 more InvestingPro Tips that can be accessed through their platform. Investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing a more comprehensive investment analysis toolkit.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.