What Happened?

Shares of electronic security systems manufacturer Napco Security Technologies (NASDAQ:NSSC) fell 28.2% in the morning session after the company reported weak fourth quarter results. Its revenue missed significantly, and its EBITDA fell short of Wall Street's estimates. The weak performance was attributed to reduced equipment sales to two large distributors. The first distributor is pulling back on all purchases from NSSC to reduce overall inventory levels, and the second distributor is going through a management restructuring. Overall, this was a weaker quarter.

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What The Market Is Telling Us

Napco’s shares are quite volatile and have had 15 moves greater than 5% over the last year. But moves this big are rare even for Napco and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 5 months ago when the stock dropped 20.4% on the news that short seller Fuzzy Panda Research published a report accusing the firm of accounting fraud, insider stock selling, and manipulating financial statements to inflate growth, with former employees backing up the claims. The stock's reaction suggests the market is worried the allegations could significantly damage the company's reputation.

Napco is down 26.5% since the beginning of the year, and at $25.72 per share, it is trading 55.7% below its 52-week high of $58 from August 2024. Investors who bought $1,000 worth of Napco’s shares 5 years ago would now be looking at an investment worth $2,250.

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