The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Napco Security Technologies (NASDAQ:NSSC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Napco Security Technologies with the means to add long-term value to shareholders.

See our latest analysis for Napco Security Technologies

Napco Security Technologies' Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Napco Security Technologies has grown EPS by 17% per year. That growth rate is fairly good, assuming the company can keep it up.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. On the revenue front, Napco Security Technologies has done well over the past year, growing revenue by 26% to US$144m but EBIT margin figures were less stellar, seeing a decline over the last 12 months. So it seems the future may hold further growth, especially if EBIT margins can remain steady.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Napco Security Technologies' forecast profits?

Are Napco Security Technologies Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Napco Security Technologies insiders have a significant amount of capital invested in the stock. We note that their impressive stake in the company is worth US$221m. That equates to 21% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. The median total compensation for CEOs of companies similar in size to Napco Security Technologies, with market caps between US$400m and US$1.6b, is around US$4.1m.

Napco Security Technologies' CEO took home a total compensation package of US$1.3m in the year prior to June 2021. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Does Napco Security Technologies Deserve A Spot On Your Watchlist?

One positive for Napco Security Technologies is that it is growing EPS. That's nice to see. The growth of EPS may be the eye-catching headline for Napco Security Technologies, but there's more to bring joy for shareholders. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. However, before you get too excited we've discovered 1 warning sign for Napco Security Technologies that you should be aware of.

Although Napco Security Technologies certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.