NAPCO Security Technologies, In (NSSC) research, news, and more from GeoInvesting

Company description

Fri, 25 Sep 2015 13:45:18 GMT

Inteliquent, Inc. provides voice telecommunications services on a wholesale basis in the United States and internationally. The company offers its services using an all-IP network, which enables to deliver global connectivity for various media, including voice. It provides voice services comprising local transit, long distance, switched access, international voice, direct inward dialing, and toll-free services. The company’s solutions enable carriers and other providers to deliver voice traffic or other services where they do not have their own network or elect not to use their own network. Inteliquent, Inc. serves primarily large competitive carriers, including wireless, wireline, cable, and broadband telephony providers, as well as non-carrier customers. The company was formerly known as Neutral Tandem, Inc. and changed its name to Inteliquent, Inc. in July 2013. Inteliquent, Inc. was founded in 2001 and is headquartered in Chicago, Illinois.

Research

Fri, 25 Sep 2015 13:45:53 GMT

We have begun tracking Napco Security Technologies (NSSC $5.91)

We’re not establishing a position in NSSC at the current time, but it’s something that we have in our pipeline that we’re evaluating. We’ll look to speak with management and will provide more information as we continue to conduct our due diligence.

NSSC offers access control systems, door security products, intrusion and fire alarm systems, and video surveillance products for use in commercial, residential, institutional, industrial, and governmental applications.

Our primary reasons for tracking are as follows:

We believe there was a recent information arbitrage opportunity presented on the company's Q4 2015 conference call. The company stated it believes they can do $100 million in revenue and $1.00 in EPS for fiscal 2017. Analyst estimates currently call for $88 million and $0.53 in EPS for 2017 and there have no updates since the conference call – we believe this could be an information arbitrage opportunity, where we have access to this information before the general public.

The company has had continued significant gross margin improvement related to operating leverage

The CEO stated on the conference call:

“One metric that's particularly noteworthy is our gross margin, which for the fiscal fourth quarter increased 220 basis points to 40.7%, and I think it really demonstrates the hockey stick-like leverage in our business model."

The company plans to continue to buy back stock, as well explore other shareholder friendly initiatives. We think this could come in the form of dividends or a special dividend, in addition to buying back stock. The company, to this point, does not have a history of issuing dividends.

"As part of our normal course of operation, the management team and Board of NAPCO routinely evaluate the company's capital allocation strategy. At the current share price, we still believe that buying back stock is a prudent use of cash, but we are also exploring other value accretive ways of deploying our cash."

The company is transitioning to a recurring revenue model -their recurring revenue continues to grow at strong growth rate (53% for year), and they hope to be at 10% of total revenue by 2017.

Caveats:

The company faces seasonality issues with its prime selling season in the spring and early summer. However, the company believes that the growing impact from recurring revenue services will help reduce seasonality and smooth out top line numbers from quarter-to-quarter.
The company is just entering fiscal 2016, and investors may be forced to adopt a longer term perspective, as FY 2017 is more than 12 months away.

Reasons For Tracking

Fri, 25 Sep 2015 04:00:00 GMT