Napco Security Technologies, Inc. (NASDAQ: NSSC) was selected for inclusion in the S&P SmallCap 600 Index, effective before the opening of trading on March 13 2026. The selection reflects the company’s market capitalization of $1.54 billion, liquidity, and financial viability as measured by S&P Global.
The inclusion follows Napco’s successful pivot to a software‑driven, subscription‑based recurring revenue model. Recurring service revenue, which now accounts for 49.5 % of total revenue, grew 12.5 % year‑over‑year in the first six months of fiscal 2026 and enjoys a 91 % gross margin. This high‑margin, predictable stream has helped lift operating margin to 26.89 % and net margin to 24.7 % in 2024, with a gross margin of 56.25 % for the same year.
Napco’s fiscal 2025 revenue of $181.62 million and earnings of $43.41 million represent a decline from 2024, but the company’s second‑quarter results, ending December 2025, showed earnings of $0.38 per share on revenue of $48.17 million, beating consensus estimates. The beat was driven by stronger recurring service revenue and improved equipment gross margins, as CEO Richard Soloway noted that "NAPCO delivered another strong quarter fueled by our recurring service revenue and its consistent year over year double digit growth, and the continued demand for our door‑locking products that drove double digit growth in our equipment revenue and improved equipment gross margins."
The S&P SmallCap 600 index includes companies with market capitalizations between $1.2 billion and $8 billion that meet liquidity and financial viability criteria, including positive earnings over the most recent quarter and trailing four quarters. Napco’s market capitalization of $1.54 billion as of March 9, 2026, places it comfortably within the index’s range. The company will replace Alexander & Baldwin Inc. in the index as part of S&P Dow Jones Indices’ regular rebalancing.
Analysts view Napco’s inclusion as a recognition of its operational strength and growing profitability. The company’s recurring revenue model, high gross margins, and strong earnings growth have attracted analyst upgrades and price‑target increases, with a consensus rating of "Moderate Buy" or "Strong Buy" and a 12‑month price target range of $45.70 to $49.80. The inclusion is expected to increase visibility among institutional investors and index‑tracking funds that follow the SmallCap 600 benchmark.
While Napco has demonstrated robust financial health, recent concerns about a slowdown in equipment sales and a need to restate financial results due to understated COGS and overvalued inventory highlight potential risks. Nonetheless, the company’s strategic pivot to recurring revenue and its strong performance in recurring service revenue suggest resilience and continued growth potential.
Richard Soloway, Chairman and CEO, added, "This milestone reflects the consistent execution and strength of our business model, the dedication of our team, and our commitment to delivering innovative security solutions while creating sustained value for our shareholders."
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