NAPCO Security Technologies Inc. Common Stock (NSSC)

FairStock Score: 64/100 — STEADY

Key Financials

Strengths

• Generates $35 million in annual free cash flow (2.2% yield on market cap)
• Strong Piotroski F-Score of 8/9 indicating robust financial health across profitability, leverage, and efficiency metrics
• High return on equity of 26.4% demonstrating efficient capital deployment
• Conservative balance sheet with debt-to-equity of just 0.12, providing financial flexibility
• Altman Z-Score of 37.3 confirms minimal bankruptcy risk and strong solvency

Concerns

• Trades significantly above Graham Number ($12) with negative 264% margin of safety—limited downside protection

AI Analysis

NAPCO Security Technologies Inc. Common Stock is a micro-cap industrials company valued at $1.6 billion. The business generates $192 million in annual revenue with a 7.0% net margin and $35 million in free cash flow. From a quality standpoint, NAPCO shows near-perfect Piotroski F-Score of 8/9 indicating exceptional financial health and Altman Z-Score of 37.3 confirms fortress-level solvency. On valuation, the stock is trading at a premium 34.0x earnings, with trades far above its Graham Number ($12) with no margin of safety. Growth dynamics show revenue growing at 12.2% and profit growth of 29.0%. The 1.3% dividend yield adds an income component for patient holders. Our composite FairStock Score of 64/100 reflects above-average fundamentals overall. Investors should weigh the business quality against the current price and their own margin of safety requirements.

Bull Case

Improving fundamentals and sector tailwinds could drive meaningful earnings growth, compressing the effective multiple for patient investors. With $35 million in annual free cash flow (2.2% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

At 34x earnings, any growth disappointment triggers rapid multiple compression—a 20% earnings miss plus multiple contraction to 20x implies 40%+ downside. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer