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what it is
Napco sells locks, alarms, fire systems, and cellular monitoring that keeps buildings watched after the hardware sale.
how it gets paid
Last year Napco Security made $182M in revenue. Recurring service revenue was the main engine at $89.2M, or 49% of sales.
why growth slowed
Revenue fell 3.8% last year. 57.6% gross margin matters most because margin tells you whether Napco is becoming a recurring-revenue company or staying just another box seller.
what just happened
Napco's latest quarter printed $97 million in revenue and $0.72 EPS, with gross margin at 57.6%.
At a glance
B+ balance sheet — decent shape, but not bulletproof
50/100 earnings predictability — expect surprises
33.6x trailing p/e — you're paying up for this one
1.4% dividend yield — cash in your pocket every quarter
25.7% return on capital — every dollar works hard here
xvary composite: 64/100 — average
What they do
Napco sells locks, alarms, fire systems, and cellular monitoring that keeps buildings watched after the hardware sale.
Napco wins because it sells the device once, then keeps billing you every month for the cellular connection behind it. Recurring service revenue was described as nearly half of sales in fiscal Q2 2026, and that kind of repeat billing makes a 57.6% gross margin feel less like hardware and more like toll collection.
How they make money
$182M
annual revenue · their business grew -3.8% last year
Recurring service revenue
$89.2M
+12.2%
Access control & locking systems
$36.4M
3.8%
Intrusion alarm systems
$32.8M
3.8%
Fire alarm, school safety & video
$23.6M
3.8%
The products that matter
cloud-based access control
Napco Access Pro
feeds recurring service contracts
This product line matters because the real money shows up after installation. Napco's recurring service revenue is running at about $99M annually, and products like this are how that base keeps expanding.
service feeder
fire alarm systems
Commercial Firewolf
up to 255 zones
These systems support up to 255 zones and contributed to $24.3M of equipment revenue last quarter. That matters because equipment still seeds the next wave of service contracts.
equipment engine
cellular monitoring services
StarLink
90% gross margin
This is the profit engine. It carries 90% gross margins and now represents nearly half of total sales, which is why investors treat NSSC differently from a plain hardware vendor.
margin engine
Key numbers
26.7%
operating margin
Operating margin → profit after running the business → so what: Napco keeps about 27 cents of operating profit from every sales dollar, which is strong for hardware-heavy security.
25.7%
return on capital
Return on capital → profit generated from money invested in the business → so what: Napco turns investment into earnings far better than an average industrial hardware company.
33.6x
trailing p/e
Trailing P/E → price relative to last year's earnings → so what: you are paying up for a company whose annual revenue just declined 3.8%.
$5M
long-term debt
Long-term debt → money owed over many years → so what: balance sheet stress is low, which gives management room to keep paying dividends and repurchasing shares.
Financial health
B+
strength
- balance sheet grade B+ — solid but not elite
- risk rank 2 — safer than 80% of stocks
- price stability 15 / 100
- long-term debt $5M (0% of capital)
B+ — functional but not a standout on the balance sheet.
Total return vs. market
Return history isn't available for NSSC right now.
source: institutional data · return history unavailable
What just happened
beat estimates
Napco's latest quarter printed $97 million in revenue and $0.72 EPS, with gross margin at 57.6%.
That EPS was up 89% vs. prior year, while revenue jumped 102% on the provided quarterly data. The quiet part out loud: the quarter was excellent, but it landed after a full year where revenue still declined 3.8% to $182 million.
$97M
revenue
$0.72
eps
57.6%
gross margin
the number that mattered
57.6% gross margin matters most because margin tells you whether Napco is becoming a recurring-revenue company or staying just another box seller.
source: company earnings report, 2026
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What could go wrong
The #1 risk here is the recurring-revenue story slowing while the stock still trades at 33.6x earnings.
med
Valuation has very little patience
At 33.6x trailing earnings, you are not buying a cheap industrial. You are buying a premium multiple attached to a very specific narrative: recurring revenue keeps compounding and margins stay rich.
If that narrative weakens, the multiple does not need to collapse to hurt you. It only needs to normalize.
med
The $99M service engine is the stock
Recurring service revenue runs at about $99M and carries 90% gross margins. That is nearly half of sales, but a much bigger share of the investment story. If growth slows there, both sentiment and margin structure get hit at once.
This is the cleanest kill switch for the thesis because it attacks the highest-margin part of the business.
med
Equipment still feeds the funnel
Equipment revenue was $83M at the annual level and grew 12.0% in the latest read. That sounds secondary until you remember every service contract starts with an installation.
If equipment demand cools, the recurring engine can keep looking fine for a while before the slowdown shows up underneath.
med
Volatility is part of the package
Price stability is just 15/100. The balance sheet is fine, but the stock itself can move around a lot because it sits in the awkward zone between small-cap hardware and premium recurring-revenue story.
That mismatch can create opportunity. It can also make holding the stock more annoying than the fundamentals suggest.
Because recurring service revenue is nearly half of sales and carries 90% gross margins, any slowdown there would pressure both the story and the economics at the same time.
source: institutional data · regulatory filings · risk analysis
Pay attention to
metric
Recurring service revenue run rate
It is about $99M annualized today. This is the number that holds the valuation together because it carries 90% gross margins.
calendar
Q3 2026 earnings report
Expected May 11, 2026. You want to see whether the recent 12.2% quarterly revenue growth and margin improvement continue.
trend
Equipment growth as a leading indicator
Equipment revenue grew 12.0% in the latest period. If that cools too much, the future service funnel can thin out before the service numbers show it.
risk
Margin giveback after the latest improvement
Gross profit margin reached 58.6%, up from 57.0%. If that move reverses while the stock still trades above 30x earnings, the market will notice quickly.
Analyst rankings
earnings predictability
50 / 100
Middle of the road. In human-speak, analysts do not see this as a smooth, clockwork earnings story.
risk rank
2
Risk rank 2 means safer than about 80% of stocks on the balance-sheet side. The business is steadier than the share price.
price stability
15 / 100
Low price stability means the chart can behave worse than the fundamentals. Good company. Not a calm stock.
source: institutional data
Institutional activity
institutional ownership data for NSSC is being compiled.
source: institutional data
Price targets
3-5 year target range
n/a
n/a
$45
current price
n/a
target midpoint · n/a from current
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