What Happened?
Shares of security systems manufacturer Napco (NASDAQ: NSSC) fell 10.5% in the afternoon session after the company reported underwhelming earnings. For its third quarter, Napco's revenue grew 11.7% year on year to $49.17 million, surpassing Wall Street's forecasts. Earnings per share came in at $0.34, which was also higher than the $0.31 per share that analysts had forecast. Despite the strong report, the stock's drop followed a significant increase in its price, which included a surge of over 87% over the previous six months and hitting a new 52-week high. This performance suggested that investors' high expectations were already reflected in the share price before the announcement, leading to a "sell the news" reaction.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Napco? Access our full analysis report here.
What Is The Market Telling Us
Napco’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. Moves this big are rare for Napco and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 25 days ago when the stock dropped 2.5% on the news that the U.S. government shutdown halted the release of crucial economic data, creating uncertainty for investors and policymakers. In its second week, the shutdown had stopped the flow of key federal figures on job creation and inflation. This came at a critical time, as the job market showed signs of slowing, and there were concerns that further declines could drag down the broader economy. In addition, Jamie Dimon raised concerns about a market correction. He added, "I would give it a higher probability than I think is probably priced in the market and by others, so if the market is pricing in 10%, I would ... say it's more like 30%." Dimon's remarks are closely watched given his influence as head of one of the nation's largest banks.
Napco is up 15.6% since the beginning of the year, and at $40.45 per share, it is trading close to its 52-week high of $44.15 from October 2025. Investors who bought $1,000 worth of Napco’s shares 5 years ago would now be looking at an investment worth $3,041.
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