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Results: Napco Security Technologies, Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates

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It's been a good week for Napco Security Technologies, Inc. (NASDAQ:NSSC) shareholders, because the company has just released its latest quarterly results, and the shares gained 4.5% to US$21.66. Revenues were US$26m, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$0.20 were also better than expected, beating analyst predictions by 19%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Napco Security Technologies

NasdaqGS:NSSC Past and Future Earnings May 6th 2020
NasdaqGS:NSSC Past and Future Earnings May 6th 2020

Taking into account the latest results, the current consensus from Napco Security Technologies' four analysts is for revenues of US$112.7m in 2021, which would reflect a satisfactory 4.4% increase on its sales over the past 12 months. Statutory earnings per share are predicted to step up 12% to US$0.92. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$113.7m and earnings per share (EPS) of US$0.94 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.

The average price target fell 6.0% to US$26.00, with reduced earnings forecasts clearly tied to a lower valuation estimate. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Napco Security Technologies at US$29.00 per share, while the most bearish prices it at US$24.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Napco Security Technologies' revenue growth is expected to slow, with forecast 4.4% increase next year well below the historical 7.0%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 5.8% per year. Factoring in the forecast slowdown in growth, it seems obvious that Napco Security Technologies is also expected to grow slower than other industry participants.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Napco Security Technologies. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Napco Security Technologies analysts - going out to 2022, and you can see them free on our platform here.

Plus, you should also learn about the 1 warning sign we've spotted with Napco Security Technologies .

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.