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3 Top Stocks From the Buoyant Security and Safety Services Industry
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The Zacks Security and Safety Services industry is poised to benefit from healthy demand for security solutions and products, thanks to growing urbanization and increased awareness regarding the importance of security. Product upgrades, per changing market scenario and digitalization, bode well for the industry’s growth. These factors point to a rosy near-term outlook for the industry despite persistent supply chain disruptions and cost inflation.
Against this buoyant backdrop, Axon Enterprise (AXON - Free Report) , Allegion plc (ALLE - Free Report) and ADT Inc. (ADT - Free Report) are well-placed to take advantage of steady demand in the industry.
About the Industry
The Zacks Security and Safety Services industry comprises companies that provide sophisticated and interactive security solutions and related services, which are meant to be used for residential, commercial and institutional purposes. A few industry players develop electrical weapons for personal defense as well as military, federal, law enforcement and private security. Some of them provide solutions for the recovery of stolen vehicles, wireless communication devices, equipment for the safety of facility infrastructure and employees, and products for detecting hazards. A few companies provide a variety of services to automobile owners and insurance companies. The industry serves customers belonging to various end markets, including manufacturing, electronics, hospitality, education, construction, telecommunications, aerospace and medical.
3 Trends Shaping the Future of the Security and Safety Services Industry
Demand for Security and Safety Services: With growing urbanization, governments are increasingly focusing on the safety and security of people, assets and the like, thus driving demand in the industry. Thanks to rising instances of hacking, the industry is seeing growing demand for Internet security products and services like firewalls and unified threat management. Increasing efforts directed toward ensuring safe infrastructure in smart cities bode well for the industry.
Product Launches and Digitalization: Focus on upgrading and developing new products to keep up with the changing market sentiment toward electronic security products and solutions is expected to bolster the top lines of security and safety services companies. Enhanced digitalization and technological developments are other tailwinds likely to benefit industry participants.
Supply Chain Woes: Despite improving, supply chain disruptions, particularly related to the shortage of components, continue to plague the industry. High raw material and freight costs are weighing on the bottom line of safety and security service companies. Given substantial international exposure, these companies also suffer from foreign currency headwinds.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Security and Safety Services industry, housed within the broader Industrial Products sector, currently carries a Zacks Industry Rank #110. This rank places it in the top 44% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than two to one.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of the negative earnings outlook for the constituent companies in aggregate. The Zacks Consensus Estimate for the group’s 2023 earnings per share has increased more than 100% since October 2022-end.
Given the bullish near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it is worth taking a look at the industry’s shareholder returns and its current valuation first
Industry Lags Sector, Outperforms S&P 500
While the Zacks Security and Safety Services industry has underperformed the broader sector over the past year, it has outperformed the Zacks S&P 500 composite index.
Over this period, the industry has declined 3.6%, compared with the sector and the S&P 500 Index’s 1.3% and 11.7% decline, respectively.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward P/E (F12M), which is a commonly used multiple for valuing security and safety services stocks, the industry is currently trading at 19.93X compared with the S&P 500’s 18.60X. It is also above the sector’s P/E (F12M) ratio of 17.12X.
Over the past five years, the industry has traded as high as 26.32X, as low as 10.31X and at the median of 17.66X, as the chart below shows:
Price-to-Earnings Ratio
Price-to-Earnings Ratio
3 Security and Safety Services Stocks to Buy
Below we discuss three stocks from the industry that have solid growth opportunities. Each of the stocks mentioned carries a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Axon: The company stands to benefit from strength in its TASER segment owing to the increasing popularity of the latest generation products like TASER 7 and TASER StrikeLight 2. The acquisition of Foundry 45 is fortifying its growth by expanding its presence in new markets globally. Focus on managing costs should aid AXON’s bottom-line performance. Axon currently sports a Zacks Rank #1.
Headquartered in Scottsdale, AZ, Axon focuses on the development, manufacture and sale of conducted electrical weapons for the law enforcement, federal, military, corrections, private security and personal defense markets. The Zacks Consensus estimate for AXON’s 2023 earnings has remained steady in the past 60 days. The stock has rallied nearly 69% in the past six months.
Price and Consensus: AXON
Allegion: Strength in non-residential and electronics end markets bode well for the company’s growth. Effective pricing actions should drive its top line. The January 2023 acquisition of Plano Group, which has expanded ALLE’s Interflex portfolio and AWFM business with new capabilities in SaaS models and recurring revenue solutions, is expected to fuel growth. Allegion sports a Zacks Rank #1.
Headquartered in Dublin, Ireland, Allegion is a global provider of security products and solutions for business and domestic purposes. The Zacks Consensus Estimate for the company’s 2023 earnings has remained steady in the past 60 days. The stock has gained 21.3% in the past six months.
Price and Consensus: ALLE
ADT: Higher average pricing, subscriber growth initiatives and improved customer retention augur well for the company’s growth. Reduced costs, thanks to higher customer satisfaction from ADT’s Virtual Assistance program, should contribute to margin expansion. The stock carries a Zacks Rank #2.
Based in Boca Raton, FL, ADT provides security and automation solutions for homes and businesses, primarily in the United States and Canada. The Zacks Consensus Estimate for ADT’s 2023 earnings has remained steady in the past 60 days. Shares of the company have increased 9% in the past six months.
Price and Consensus: ADT
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3 Top Stocks From the Buoyant Security and Safety Services Industry
The Zacks Security and Safety Services industry is poised to benefit from healthy demand for security solutions and products, thanks to growing urbanization and increased awareness regarding the importance of security. Product upgrades, per changing market scenario and digitalization, bode well for the industry’s growth. These factors point to a rosy near-term outlook for the industry despite persistent supply chain disruptions and cost inflation.
Against this buoyant backdrop, Axon Enterprise (AXON - Free Report) , Allegion plc (ALLE - Free Report) and ADT Inc. (ADT - Free Report) are well-placed to take advantage of steady demand in the industry.
About the Industry
The Zacks Security and Safety Services industry comprises companies that provide sophisticated and interactive security solutions and related services, which are meant to be used for residential, commercial and institutional purposes. A few industry players develop electrical weapons for personal defense as well as military, federal, law enforcement and private security. Some of them provide solutions for the recovery of stolen vehicles, wireless communication devices, equipment for the safety of facility infrastructure and employees, and products for detecting hazards. A few companies provide a variety of services to automobile owners and insurance companies. The industry serves customers belonging to various end markets, including manufacturing, electronics, hospitality, education, construction, telecommunications, aerospace and medical.
3 Trends Shaping the Future of the Security and Safety Services Industry
Demand for Security and Safety Services: With growing urbanization, governments are increasingly focusing on the safety and security of people, assets and the like, thus driving demand in the industry. Thanks to rising instances of hacking, the industry is seeing growing demand for Internet security products and services like firewalls and unified threat management. Increasing efforts directed toward ensuring safe infrastructure in smart cities bode well for the industry.
Product Launches and Digitalization: Focus on upgrading and developing new products to keep up with the changing market sentiment toward electronic security products and solutions is expected to bolster the top lines of security and safety services companies. Enhanced digitalization and technological developments are other tailwinds likely to benefit industry participants.
Supply Chain Woes: Despite improving, supply chain disruptions, particularly related to the shortage of components, continue to plague the industry. High raw material and freight costs are weighing on the bottom line of safety and security service companies. Given substantial international exposure, these companies also suffer from foreign currency headwinds.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Security and Safety Services industry, housed within the broader Industrial Products sector, currently carries a Zacks Industry Rank #110. This rank places it in the top 44% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than two to one.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of the negative earnings outlook for the constituent companies in aggregate. The Zacks Consensus Estimate for the group’s 2023 earnings per share has increased more than 100% since October 2022-end.
Given the bullish near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it is worth taking a look at the industry’s shareholder returns and its current valuation first
Industry Lags Sector, Outperforms S&P 500
While the Zacks Security and Safety Services industry has underperformed the broader sector over the past year, it has outperformed the Zacks S&P 500 composite index.
Over this period, the industry has declined 3.6%, compared with the sector and the S&P 500 Index’s 1.3% and 11.7% decline, respectively.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward P/E (F12M), which is a commonly used multiple for valuing security and safety services stocks, the industry is currently trading at 19.93X compared with the S&P 500’s 18.60X. It is also above the sector’s P/E (F12M) ratio of 17.12X.
Over the past five years, the industry has traded as high as 26.32X, as low as 10.31X and at the median of 17.66X, as the chart below shows:
Price-to-Earnings Ratio
Price-to-Earnings Ratio
3 Security and Safety Services Stocks to Buy
Below we discuss three stocks from the industry that have solid growth opportunities. Each of the stocks mentioned carries a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Axon: The company stands to benefit from strength in its TASER segment owing to the increasing popularity of the latest generation products like TASER 7 and TASER StrikeLight 2. The acquisition of Foundry 45 is fortifying its growth by expanding its presence in new markets globally. Focus on managing costs should aid AXON’s bottom-line performance. Axon currently sports a Zacks Rank #1.
Headquartered in Scottsdale, AZ, Axon focuses on the development, manufacture and sale of conducted electrical weapons for the law enforcement, federal, military, corrections, private security and personal defense markets. The Zacks Consensus estimate for AXON’s 2023 earnings has remained steady in the past 60 days. The stock has rallied nearly 69% in the past six months.
Price and Consensus: AXON
Allegion: Strength in non-residential and electronics end markets bode well for the company’s growth. Effective pricing actions should drive its top line. The January 2023 acquisition of Plano Group, which has expanded ALLE’s Interflex portfolio and AWFM business with new capabilities in SaaS models and recurring revenue solutions, is expected to fuel growth. Allegion sports a Zacks Rank #1.
Headquartered in Dublin, Ireland, Allegion is a global provider of security products and solutions for business and domestic purposes. The Zacks Consensus Estimate for the company’s 2023 earnings has remained steady in the past 60 days. The stock has gained 21.3% in the past six months.
Price and Consensus: ALLE
ADT: Higher average pricing, subscriber growth initiatives and improved customer retention augur well for the company’s growth. Reduced costs, thanks to higher customer satisfaction from ADT’s Virtual Assistance program, should contribute to margin expansion. The stock carries a Zacks Rank #2.
Based in Boca Raton, FL, ADT provides security and automation solutions for homes and businesses, primarily in the United States and Canada. The Zacks Consensus Estimate for ADT’s 2023 earnings has remained steady in the past 60 days. Shares of the company have increased 9% in the past six months.
Price and Consensus: ADT