Napco Security Technologies' Earnings Growth Lags 41% CAGR For Shareholders – Simply Wall St
Stock Analysis
We think all investors should try to buy and hold high quality multi-year winners. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held Napco Security Technologies, Inc. (NASDAQ:NSSC) shares for the last five years, while they gained 453%. And this is just one example of the epic gains achieved by some long term investors. It's down 5.4% in the last seven days.
Although Napco Security Technologies has shed US$54m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
See our latest analysis for Napco Security Technologies
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, Napco Security Technologies achieved compound earnings per share (EPS) growth of 26% per year. This EPS growth is slower than the share price growth of 41% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth. This optimism is visible in its fairly high P/E ratio of 52.35.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Napco Security Technologies' earnings, revenue and cash flow.
It's good to see that Napco Security Technologies has rewarded shareholders with a total shareholder return of 16% in the last twelve months. However, the TSR over five years, coming in at 41% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example – Napco Security Technologies has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.
We will like Napco Security Technologies better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
What are the risks and opportunities for Napco Security Technologies?
NasdaqGS:NSSC
Napco Security Technologies
Napco Security Technologies, Inc. develops, manufactures, and sells electronic security products in the United States and internationally.
Rewards
Trading at 18% below our estimate of its fair value
Earnings are forecast to grow 44.49% per year
Risks
High level of non-cash earnings
Significant insider selling over the past 3 months
Share Price
Market Cap
1Y Return
Further research on
Napco Security Technologies
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Napco Security Technologies, Inc. develops, manufactures, and sells electronic security products in the United States and internationally.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
Read more about these checks in the individual report sections or in our analysis model.
Flawless balance sheet with reasonable growth potential.
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