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4 Top Stocks to Buy From a Promising Security and Safety Services Industry
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The Zacks Security and Safety Services industry seems to be gaining from strong demand for products and solutions, supported by growing awareness about the security and safety of people and infrastructure. Improving supply chains and a deceleration in inflation augur well for the industry’s near-term prospects.
The increase in demand for cybersecurity products is supporting several industry participants as well. Companies like Alarm.com Holdings, Inc. (ALRM - Free Report) , Brady Corporation (BRC - Free Report) , Napco Security Technologies, Inc. (NSSC - Free Report) and Lakeland Industries (LAKE - Free Report) are poised to take advantage of the buoyancy 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 from various end markets, including manufacturing, electronics, hospitality, education, construction, telecommunications, aerospace and medical.
Major Trends Shaping the Future of the Security and Safety Services Industry
Demand for Security and Safety Services: Growing instances of terrorism and criminal activities with concerns related to the ever-increasing fraudulent activities are promoting demand for security and safety services. For example, governments, commercial operations, communities and other establishments with the goal of protection, safety and surveillance of people or assets are rapidly deploying IP-based cameras. This is acting as a key growth driver for the industry. With growing urbanization, governments are focusing on increasing the safety and security of people and assets, thus driving demand in the industry. With 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.
Improving Supply Chains: While supply-chain disruptions persist, the situation has improved significantly, as evidenced by the Institute for Supply Management report’s Supplier Deliveries Index, which reflected faster deliveries for the 15th straight month in December 2023. This is expected to drive the industry’s growth in 2024. A reduction in raw material costs, thanks to the deceleration in inflation, should also support the bottom line of industry players.
High Debt Levels: The development of new products and services along with the update of existing ones is required to cater to the changing customer needs, making steady investments necessary. While this augurs well for the industry’s long-term growth, hefty investments in research and development often leave companies with highly leveraged balance sheets.
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 #28. This rank places it in the top 11% 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 bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
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 Underperforms Sector & S&P 500
The Zacks Security and Safety Services industry has underperformed both the broader sector and the Zacks S&P 500 composite index over the past year.
Over this period, the industry has gained 3.3%, compared with the sector and the S&P 500 Index’s increase of 14.7% and 25.3%, 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 20.15X compared with the S&P 500’s 20.5X. However, it exceeds the sector’s P/E (F12M) ratio of 17.2X.
Over the past five years, the industry has traded as high as 27.04X, as low as 12.65X and at the median of 19.31X, as the chart below shows:
Price-to-Earnings Ratio
Price-to-Earnings Ratio
4 Security and Safety Services Stocks to Buy
Alarm.com: The company provides interactive security solutions for home and business owners. Alarm offers security systems that include door locks, motion sensors, garage doors, thermostats, video cameras as well as high-definition video monitoring and commercial video surveillance solutions. Strengthening demand for products and solutions and buyout activities have been driving the company’s performance of late. A favorable product mix and improved supply chain conditions are likely to be beneficial moving ahead.
In the past 60 days, the Zacks Rank #1 (Strong Buy) company’s earnings estimates have increased 12.4% for 2023. Its shares have appreciated 26.5% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: ALRM
Napco Security Technologies: The company offers access control systems, door-locking products, intrusion and fire alarm systems, and video surveillance systems for commercial, residential, institutional, industrial and governmental applications. The Zacks Rank #1 company has been benefiting from strong recurring service revenues, improvement in the supply chain and focus on product innovation. Solid demand for its products in school, healthcare, and multi-dwelling commercial and residential applications markets is expected to drive its performance in the quarters ahead.
The Zacks Consensus Estimate for Napco Security’s fiscal 2024 (ending June 2024) earnings has been revised upward by 14.3% in the past 60 days. Shares of NSSC have surged 27.8% in the past year.
Price and Consensus: NSSC
Lakeland Industries: The company manufactures industrial protective clothing and accessories for the industrial and public protective clothing market. The Zacks Rank #1 company has been witnessing significant contributions from the acquisition of Eagle Technical Products, which has expanded the company’s fire service protective clothing division. Growth in the direct-to-customer container business and strength in fire service and industrial product categories are expected to bolster the company’s growth.
The Zacks Consensus Estimate for Lakeland Industries’ fiscal 2024 (ending January 2024) earnings has been revised upward by 8.6% in the past 60 days. Shares of LAKE have soared 29.3% in a year.
Price and Consensus: LAKE
Brady: The company offers complete identification solutions and workplace safety products that help companies improve productivity, performance, safety and security. Brady is gaining from its continued focus on product development, investments in growth opportunities, solid operational execution and cost management actions. Inorganic activities position BRC well for future growth.
The Zacks Consensus Estimate for Brady’s fiscal 2024 (ending July 2024) earnings has been stable in the past 60 days. Shares of the Zacks Rank #2 (Buy) company have gained 28.7% in a year.
Price and Consensus: BRC
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4 Top Stocks to Buy From a Promising Security and Safety Services Industry
The Zacks Security and Safety Services industry seems to be gaining from strong demand for products and solutions, supported by growing awareness about the security and safety of people and infrastructure. Improving supply chains and a deceleration in inflation augur well for the industry’s near-term prospects.
The increase in demand for cybersecurity products is supporting several industry participants as well. Companies like Alarm.com Holdings, Inc. (ALRM - Free Report) , Brady Corporation (BRC - Free Report) , Napco Security Technologies, Inc. (NSSC - Free Report) and Lakeland Industries (LAKE - Free Report) are poised to take advantage of the buoyancy 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 from various end markets, including manufacturing, electronics, hospitality, education, construction, telecommunications, aerospace and medical.
Major Trends Shaping the Future of the Security and Safety Services Industry
Demand for Security and Safety Services: Growing instances of terrorism and criminal activities with concerns related to the ever-increasing fraudulent activities are promoting demand for security and safety services. For example, governments, commercial operations, communities and other establishments with the goal of protection, safety and surveillance of people or assets are rapidly deploying IP-based cameras. This is acting as a key growth driver for the industry. With growing urbanization, governments are focusing on increasing the safety and security of people and assets, thus driving demand in the industry. With 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.
Improving Supply Chains: While supply-chain disruptions persist, the situation has improved significantly, as evidenced by the Institute for Supply Management report’s Supplier Deliveries Index, which reflected faster deliveries for the 15th straight month in December 2023. This is expected to drive the industry’s growth in 2024. A reduction in raw material costs, thanks to the deceleration in inflation, should also support the bottom line of industry players.
High Debt Levels: The development of new products and services along with the update of existing ones is required to cater to the changing customer needs, making steady investments necessary. While this augurs well for the industry’s long-term growth, hefty investments in research and development often leave companies with highly leveraged balance sheets.
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 #28. This rank places it in the top 11% 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 bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
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 Underperforms Sector & S&P 500
The Zacks Security and Safety Services industry has underperformed both the broader sector and the Zacks S&P 500 composite index over the past year.
Over this period, the industry has gained 3.3%, compared with the sector and the S&P 500 Index’s increase of 14.7% and 25.3%, 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 20.15X compared with the S&P 500’s 20.5X. However, it exceeds the sector’s P/E (F12M) ratio of 17.2X.
Over the past five years, the industry has traded as high as 27.04X, as low as 12.65X and at the median of 19.31X, as the chart below shows:
Price-to-Earnings Ratio
Price-to-Earnings Ratio
4 Security and Safety Services Stocks to Buy
Alarm.com: The company provides interactive security solutions for home and business owners. Alarm offers security systems that include door locks, motion sensors, garage doors, thermostats, video cameras as well as high-definition video monitoring and commercial video surveillance solutions. Strengthening demand for products and solutions and buyout activities have been driving the company’s performance of late. A favorable product mix and improved supply chain conditions are likely to be beneficial moving ahead.
In the past 60 days, the Zacks Rank #1 (Strong Buy) company’s earnings estimates have increased 12.4% for 2023. Its shares have appreciated 26.5% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: ALRM
Napco Security Technologies: The company offers access control systems, door-locking products, intrusion and fire alarm systems, and video surveillance systems for commercial, residential, institutional, industrial and governmental applications. The Zacks Rank #1 company has been benefiting from strong recurring service revenues, improvement in the supply chain and focus on product innovation. Solid demand for its products in school, healthcare, and multi-dwelling commercial and residential applications markets is expected to drive its performance in the quarters ahead.
The Zacks Consensus Estimate for Napco Security’s fiscal 2024 (ending June 2024) earnings has been revised upward by 14.3% in the past 60 days. Shares of NSSC have surged 27.8% in the past year.
Price and Consensus: NSSC
Lakeland Industries: The company manufactures industrial protective clothing and accessories for the industrial and public protective clothing market. The Zacks Rank #1 company has been witnessing significant contributions from the acquisition of Eagle Technical Products, which has expanded the company’s fire service protective clothing division. Growth in the direct-to-customer container business and strength in fire service and industrial product categories are expected to bolster the company’s growth.
The Zacks Consensus Estimate for Lakeland Industries’ fiscal 2024 (ending January 2024) earnings has been revised upward by 8.6% in the past 60 days. Shares of LAKE have soared 29.3% in a year.
Price and Consensus: LAKE
Brady: The company offers complete identification solutions and workplace safety products that help companies improve productivity, performance, safety and security. Brady is gaining from its continued focus on product development, investments in growth opportunities, solid operational execution and cost management actions. Inorganic activities position BRC well for future growth.
The Zacks Consensus Estimate for Brady’s fiscal 2024 (ending July 2024) earnings has been stable in the past 60 days. Shares of the Zacks Rank #2 (Buy) company have gained 28.7% in a year.
Price and Consensus: BRC