Investidea: Napco, because chaos is growing.

Инвестидея: Napco, потому что хаос все нарастает

Napco Security TechnologiesNSSC17.64 $BuyService in partnership with Tinkoff Investments. Quotes are updated every 15 minutes

Today we have a moderately speculative idea.: take shares of a manufacturer of goods to protect the property of Napco Security Technologies (NASDAQ: NSSC) in view of the deteriorating law and order situation in America.

Growth potential and validity: 17,5% behind 14 Months; 40% behind 3 of the year; 10% per annum during 13 years.

Why stocks can go up: because in the USA it will no longer be possible to let a girl on a donkey travel around the states, loaded with gold.

How do we act: we take shares now by 17,81 $.

When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.

No guarantees

Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.

And what is there with the author's forecasts

Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.

So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.

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Investment editorial office

What the company makes money on

Napco sells property security products and services sold devices and systems. We analyzed the company's business in the old investment idea for it, and we will not repeat. But let's highlight some important points.:

  1. Nearly all of the company's sales are in the US..
  2. About 2/3 the company's revenues give goods, and a third - services.
  3. The gross margin of the goods is not very large - only 8,09% from the proceeds from their sale.

The services segment is much more marginal: the gross margin here is 87,36% from segment revenue.

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Инвестидея: Napco, потому что хаос все нарастает

Инвестидея: Napco, потому что хаос все нарастает

Arguments in favor of the company

Fell down. The company's shares have fallen sharply over the past six months.: with 25.78 $ in December to 17,81 $ Right away. There are two reasons for the fall:

  1. The company's financials slightly fell short of analysts' high expectations..
  2. The company is relatively expensive.

I believe, that quotes are waiting for a rebound, because one way or another the company's financial performance is growing, and the prospects of its industry suggest that, that the value of the company is not too high.

Kings of the Streets. Crime rate on the rise in the US, And, it seems to me, it may well reach the level of the 1970s in the coming 10 years - maybe, even surpass it.

The level of polarization of American society and the dominant left-liberal discourse, which encourages the idea of involuntary asset redistribution, can lead to a deterioration in law enforcement in large cities and an exodus of the population to well-fenced and protected suburbs.

That, that almost all of Napco's sales are in the US, here will be a plus: I wouldn't expect crime to rise on such a scale anywhere outside of the US.

Инвестидея: Napco, потому что хаос все нарастает

Small. The company has a capitalization of 654.193 million, which makes her quotes mobile - and very receptive to good news.

Clean accounting. More money in the company's accounts, than the sum of all her debts, what should be considered a big plus: this may lead to its shares of investors, who are worried about rising rates and rising prices for loans.

Progress. Gross and operating margin of the company is constantly growing, also due to an increase in the share of renewable revenue: subscriptions and renewals of existing service contracts. Renewable revenue gives already 30% from the entire revenue of the company, and the share of services in its business will grow.

Can buy or make friends. Taking all of the above into account, the company can if not buy, then at least enter into a strategic partnership with it. This partner can be one of the large technology companies: Napco's business fits well into the smart home scheme. News about, that Napco's partner will be the same Amazon, will send quotes Napco to the stratosphere.

But I think, that Napco will buy some investment fund, who will release it on the stock exchange in a couple of years, to sell its shares at exorbitant prices during the IPO, as soon as property protection becomes a new popular and promising topic in the investment community.

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What can get in the way

Price. Even after the drop in quotations, the key indicators of the company's value look somewhat inflated.: it stands as 5,33 annual revenue, a P / E she has 37,58. So you gotta get ready for it, that her shares can shake.

"In pocket, and they will steal it ». It is very important for a company to sell its devices and components in sufficient quantities., so that you can profit from your customers, imposing their services on them. Problems with logistics are now a real scourge of all manufacturing companies..

So that might be the case., that the company will sell fewer goods this half of the year due to production difficulties and this will limit its ability to further extract large profits from a more marginal service segment. Well, the overall revenue will decrease slightly because of this..

What's the bottom line?

Shares can be taken now by 17,81 $. Then there are three options:

  1. keep up the level 21 $. Think, we will reach it in the next 14 Months;
  2. wait for quotes to return to the level 25 $. Here it is better to focus on the time 3 of the year;
  3. if last time you took stocks with a long-term expectation, then you can buy it now.

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