DA Davidson has reaffirmed its Buy recommendation on Napco Security Technologies, Inc. (NASDAQ:NSSC) and kept a $50.00 price target in place after reviewing the company’s fiscal second-quarter 2026 financials. Napco, a provider of security solutions that carries a market capitalization of approximately $1.51 billion, has seen its stock appreciate 54.85% over the past 12 months.
The firm reported several metrics that outperformed DA Davidson’s internal expectations for the quarter. Operating profit, EBITDA and earnings per share all came in above the firm’s projections, driven in part by stronger-than-anticipated gross margins in both Equipment sales and recurring service revenue (RSR). Overall revenue modestly exceeded DA Davidson’s forecast, while adjusted EBITDA topped that outlook by $1.3 million, or 9%.
External financial-data reference points from InvestingPro underline the company’s balance-sheet and operating health. Napco holds $115 million in cash and carries no debt, a liquidity position reflected in a current ratio of 7.06. InvestingPro’s composite assessment assigns Napco a "GREAT" overall financial health score of 3.38, with particularly robust marks in profitability and cash flow metrics. InvestingPro Tips emphasize that the company "holds more cash than debt on its balance sheet" and that "liquid assets exceed short term obligations."
Recurring service revenue continues to expand. Management reported a 13% year-over-year increase in RSR, bringing the annualized run-rate to $99 million - a $4 million increase since October. Both the Equipment segment and RSR posted low double-digit growth versus the prior-year period, with DA Davidson attributing higher Equipment sales in part to increased locking volume during the quarter.
DA Davidson noted that its own estimates and the $50.00 price target remain under review pending additional analysis and the company’s earnings conference call, scheduled for 11 a.m. ET on Tuesday. The research house’s decision to reiterate the Buy rating follows the quarter’s upside against expectations, while a broader analyst consensus remains strongly favorable: the market consensus recommendation stands at 1.17, which denotes a Strong Buy.
At the same time, InvestingPro’s Fair Value assessment signals that the shares could be trading above what the model deems intrinsic value, suggesting a valuation caveat despite operational momentum. DA Davidson’s commentary and InvestingPro’s metrics together present a picture of solid near-term performance paired with a need to monitor valuation and forward guidance.
Additional broker activity echoed the positive reception to the quarter. Napco reported fiscal second-quarter earnings per share of $0.38, beating the forecasted $0.32 - an 18.75% surprise. Revenue for the quarter reached $48.17 million, slightly above expectations of $47.8 million, representing a 12.2% year-over-year increase versus Street expectations of 11.3%. Reported EPS rose 36%, outstripping analyst projections calling for 14.4% growth.
Following the strong quarter, Needham increased its price target on Napco to $49.00 from $47.00, while maintaining a Buy rating. These revisions reflect analysts’ reactions to the quarter’s margin gains, recurring revenue expansion and the company’s cash-rich, debt-free balance sheet.
Summary
DA Davidson maintained a Buy rating and a $50.00 target on Napco Security after results that surpassed expectations across operating profit, EBITDA and EPS. The quarter showed improved gross margins in Equipment and recurring service revenue, a 13% increase in RSR to a $99 million annualized run-rate, and a strong cash position with no debt. Analysts have reacted by holding or nudging up targets, though certain valuation tools flag the shares as potentially trading above intrinsic value.
Key points
- DA Davidson reiterated a Buy rating and a $50.00 price target after Napco’s fiscal Q2 2026 results outperformed expectations.
- Recurring service revenue rose 13% year-over-year to an annualized run-rate of $99 million; both Equipment and RSR grew in the low double digits.
- Napco’s balance sheet shows $115 million in cash and no debt; InvestingPro reports a current ratio of 7.06 and a financial health score of 3.38.
Risks and uncertainties
- Valuation risk - InvestingPro’s Fair Value assessment indicates the shares may be trading above intrinsic value, which could temper upside despite strong operating metrics.
- Near-term guidance and analyst estimates - DA Davidson said its estimates and price target are under review pending further analysis and the company’s earnings call, so forward-looking projections could be revised.
- Reliance on recurring revenue growth - Continued top-line momentum depends on sustaining RSR expansion and Equipment sales, which may be sensitive to demand dynamics in security markets.
Investors seeking more detailed financial models and analyst reports can access comprehensive research coverage available for Napco and other U.S. equities through subscription research services referenced by the data providers noted above.