While Axon Enterprise looks to shore up support after getting Tasered on earnings, fellow security specialist Napco Security Technologies has blasted toward a buy point. After soaring over 9% Monday, Napco saw its Composite Rating jump to the highest-possible 99. The rating for Axon stock remains just behind with an impressive score of 98.
As Napco locks in a spot on the IBD Breakout Stocks Index, four industry peers also try to crack the safe and unlock a breakout. Federal Signal, Brink's, MSA Safety and APi Group are all readying moves of their own.
But selling pressure in the market amid the the debt ceiling drama casts a shadow over these nascent climbs.
Napco, Axon and the others all hail from the Software/Security industry group, which ranks a weak No. 101 out of the 197 groups IBD tracks.
Despite the low ranking, clear signs of demand for these security stocks have emerged. Axon, Federal Signal and APi all safeguarded a spot on this month's list of new buys by the best mutual funds.
While Napco did not make the cut, 25 funds with an A+ or A rating from IBD owns shares of NSSC stock. Plus, Napco has flashed eight consecutive quarters of rising fund ownership. The number of funds with a position in the stock rose from 270 between April and June 2022, to 314 in the first three months of 2023.
Napco, Axon Lead Earnings Charge Among Security Firms
In addition to generating 222% earnings growth to 29 cents per share last quarter, Napco has now locked down a whopping 319.6% average EPS growth in its last three reports.
Wall Street now forecasts 87% earnings growth for the current fiscal year.
While revenue remains small — in the $40 million range per quarter — the company has secured solid and steady sales growth, ranging from 21% to 54% over the last eight quarters. On May 8, Napco reported numbers for fiscal Q3 2023, ended March 31. The company posted record Q3 sales of $43.5 million, up 21% compared to the prior year.
Axon posted an impressive 96% profit spike to 88 cents per share in Q1, bringing its three-quarter average to 33%. But rather than trigger a new run, Axon stock got zapped on the news, falling over 15% on May 10, one day after the report. Slipping farther below its 50-day moving average Wednesday, Axon failed to hold support around the 200 mark.
| Company | Symbol | Comp Rating | EPS % Chg Last Qtr | Avg EPS % Chg 3Q | EPS Est Cur Qtr % | EPS Est Cur Yr % | EPS Rating | RS Rating | SMR Rating | A/D Rating |
|---|---|---|---|---|---|---|---|---|---|---|
| Napco Security Technologies | NSSC | 99 | 222 | 319.6 | 38 | 87 | 98 | 97 | B | B |
| Axon Enterprise | AXON | 98 | 96 | 33 | 43 | 43 | 99 | 95 | A | B- |
| Brink's | BCO | 93 | -3 | 14.5 | 3 | 14 | 86 | 87 | B | A- |
| Federal Signal | FSS | 93 | 35 | 29.4 | 18 | 20 | 94 | 91 | B | C+ |
| MSA Safety | MSA | 92 | 24 | 25.5 | 14 | 6 | 84 | 83 | A | B+ |
| APi Group | APG | 91 | 9 | 12.8 | 7 | 13 | 89 | 91 | B | B- |
Napco Leads Breakout Charge While Axon Regroups
Based in New York, Napco is a leading manufacturer of security products, including intrusion, fire, video, wireless, access control and door locking systems. Its products are sold and installed worldwide by security professionals for commercial, industrial, institutional, residential and government applications.
Trying to hold the bulk of Monday's 9.4% gain, Napco closed Tuesday 5% below a 39.32 entry in a cup pattern. The stock dipped again Wednesday, but volume came in well below average, a sign large investors are not aggressively dumping shares.
Napco remains well above its 50-day moving average after gapping up to reclaim that benchmark after strong earnings. Note how the 21-day exponential moving average is climbing back above the 50-day line — a sign of further improving technical strength.
As Napco tries to secure its post-earnings climb, MSA Safety looks to safeguard a buy zone of its own. Fellow security plays Brink's, Federal Signal and APi are all setting up potential breakouts — if the market cooperates.
See if Axon stock stem its decline and regain its footing — and its 10-week line — as the debt ceiling drama plays out.
IBD Breakout Opportunities ETF
The IBD Breakout Opportunities ETF from Innovator Capital Management tracks the IBD Breakout Stocks Index. As with other index ETFs, this fund allows you to invest in the entire index in addition to, or rather than, buying individual stocks. Learn more here about the ETF and Innovator funds.
Follow Matthew Galgani on Twitter at @IBD_MGalgani.
