Why Napco's Swoon May Be Brief

Cause For Alarm?
Having tumbled from 11 a share a year ago to 5.46 on Apr. 4, Napco Security Systems (NSSC ) is hoping a new product introduced in January will pull it up. Napco's Web-based surveillance set-up, VIP-GatewayX, lets people monitor activities in their homes or offices through live video on computers or cell phones. Another Napco product, Freedom 64, is an alarm that uses no code. A special key simply locks or unlocks a homeowner's door. Easy to use, the system, introduced in December, automatically turns the alarm on or off through existing dead-bolt locks. Napco missed its earnings estimates for the second quarter ended Dec. 31, 2006, prompting analysts to cut their forecasts. But James Clement of investment firm Sidoti retained his buy rating, with a 12-month target of 10, down from an earlier 14. A drop in European sales is behind the damage. CEO Richard Solloway says he expects VIP-GatewayX to be a "tremendous success" as major alarm companies placed orders and will advertise the product nationally. Joshua Jabs of Roth Capital Partners, also with a buy, sees Napco earning 31 cents a share in fiscal 2007 ending June 30, and 36 cents in 2009, compared with 32 cents in 2006.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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