Mizuho initiates Napco Security stock with Outperform rating on StarLink growth

Published 10/07/2025, 11:44
Mizuho initiates Napco Security stock with Outperform rating on StarLink growth

Investing.com - Mizuho (NYSE:MFG) initiated coverage on Napco Security Technologies, Inc. (NASDAQ:NSSC) with an Outperform rating and a $39.00 price target on Thursday. According to InvestingPro data, NSSC currently trades at $30.20, with analysts’ targets ranging from $24.50 to $33.00. The company maintains strong financial health, with an "Overall Great" rating from InvestingPro’s comprehensive analysis.

The research firm highlighted Napco’s leading position across security markets with offerings in Locking, Alarms, and Access Control, identifying the company’s StarLink radio and associated service business as key differentiators that enable premium margins. The company’s strong market position is reflected in its impressive 57.26% gross profit margin and robust current ratio of 6.74.

Mizuho noted that StarLink services generate approximately 90% gross profit margins and are approaching 50% of Napco’s total revenue, creating a transformed financial profile with additional margin upside potential as service revenues compound.

The firm’s bullish outlook is based on Napco’s unique market position to benefit from the secular copper telephone wire replacement cycle and expectations for service revenue re-acceleration in fiscal fourth quarter, driven by significant radio sales into the channel in fiscal first quarter (up 93% year-over-year).

Mizuho also identified potential upside beyond its base case from new product offerings that could drive incremental service revenue streams, though it characterized this opportunity as still a "show-me" story. For deeper insights into NSSC’s valuation and growth prospects, including 10+ additional ProTips and comprehensive financial analysis, check out the detailed Pro Research Report available on InvestingPro.

In other recent news, NAPCO Security Technologies Inc reported its third-quarter earnings for fiscal year 2025, exceeding expectations with an earnings per share (EPS) of $0.36, compared to the forecasted $0.29. Although the company experienced a slight revenue shortfall, with revenue reaching $43.96 million against an expected $45.83 million, the earnings beat was significant. NAPCO’s strong cash position and zero debt were highlighted alongside recurring monthly service revenue growth of 10.6% to $21.6 million. Analysts from firms such as D.A. Davidson and Needham and Company have shown interest in the company’s strategic moves and market conditions, particularly in the school security sector. The company is actively pursuing product innovation, aiming to increase recurring monthly revenue to over 50% of total revenue. Additionally, NAPCO announced a quarterly dividend increase to $0.14 per share, reflecting management’s confidence in its long-term growth strategy. The firm continues to focus on expanding its cloud-based product offerings and maintaining a competitive edge in the security market.

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