NAPCO Security Technologies, Inc. (NASDAQ: NSSC) is a leading company in the security products sector, offering a range of alarm systems and locking devices. It competes with other firms in the security technology market. On February 3, 2025, NSSC reported earnings per share (EPS) of $0.28, which was below the estimated $0.34. The company's actual revenue was $42.93 million, falling short of the estimated $49.93 million.
In the second quarter of fiscal 2025, NSSC reported net sales of $43 million, a 9.7% decrease from the previous year. Despite this decline, the company saw a 14.4% increase in recurring service revenue (RSR), reaching $21.2 million. RSR now accounts for 49% of the total revenue, with a prospective run rate of approximately $86 million based on January 2025 figures, as highlighted by Richard Soloway, Chairman and CEO.
The gross profit margin improved to 57.0%, up from 52.6% in the same quarter of the previous fiscal year. This improvement of over 400 basis points indicates better cost management and efficiency. However, diluted EPS fell to $0.28 from $0.34 in the prior year, reflecting the challenges the company faces despite the positive changes in revenue composition and margin.
NSSC's financial metrics provide insight into its market valuation. The company has a price-to-earnings (P/E) ratio of approximately 18.78, indicating how the market values its earnings. Its price-to-sales ratio is about 4.94, reflecting the market's valuation relative to its revenue. The enterprise value to sales ratio is roughly 4.52, showing the relationship between the company's enterprise value and its sales.
The company maintains a strong liquidity position with a current ratio of approximately 6.94, indicating its ability to cover short-term liabilities with its short-term assets. Additionally, NSSC has a low debt-to-equity ratio of about 0.03, suggesting a conservative use of debt in its capital structure. The Board has declared a quarterly dividend of $0.125 per share, payable on April 3, 2025, to shareholders of record as of March 12, 2025.
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