Critical Comparison: Eastern (NASDAQ:EML) and NAPCO Security Technologies (NASDAQ:NSSC)

NAPCO Security Technologies (NASDAQ:NSSC) and Eastern (NASDAQ:EML) are both small-cap industrials companies, but which is the better investment? We will contrast the two businesses based on the strength of their dividends, profitability, risk, earnings, analyst recommendations, institutional ownership and valuation.

Volatility and Risk

NAPCO Security Technologies has a beta of 1.51, suggesting that its share price is 51% more volatile than the S&P 500. Comparatively, Eastern has a beta of 0.98, suggesting that its share price is 2% less volatile than the S&P 500.

Institutional & Insider Ownership

85.1% of NAPCO Security Technologies shares are held by institutional investors. Comparatively, 77.0% of Eastern shares are held by institutional investors. 5.7% of NAPCO Security Technologies shares are held by company insiders. Comparatively, 17.0% of Eastern shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares NAPCO Security Technologies and Eastern’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
NAPCO Security Technologies	24.70%	27.45%	23.48%
Eastern	2.96%	7.18%	3.84%

Dividends

NAPCO Security Technologies pays an annual dividend of $0.56 per share and has a dividend yield of 1.3%. Eastern pays an annual dividend of $0.44 per share and has a dividend yield of 2.3%. NAPCO Security Technologies pays out 42.1% of its earnings in the form of a dividend. Eastern pays out 35.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. NAPCO Security Technologies has raised its dividend for 2 consecutive years. Eastern is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for NAPCO Security Technologies and Eastern, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
NAPCO Security Technologies	0	2	6	0	2.75
Eastern	0	1	0	0	2.00

NAPCO Security Technologies presently has a consensus target price of $47.83, indicating a potential upside of 12.48%. Given NAPCO Security Technologies’ stronger consensus rating and higher possible upside, analysts plainly believe NAPCO Security Technologies is more favorable than Eastern.

Earnings & Valuation

This table compares NAPCO Security Technologies and Eastern”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
NAPCO Security Technologies	$181.62 million	8.35	$43.41 million	$1.33	31.97
Eastern	$272.75 million	0.43	-$8.53 million	$1.24	15.48

NAPCO Security Technologies has higher earnings, but lower revenue than Eastern. Eastern is trading at a lower price-to-earnings ratio than NAPCO Security Technologies, indicating that it is currently the more affordable of the two stocks.

Summary

NAPCO Security Technologies beats Eastern on 13 of the 17 factors compared between the two stocks.

About NAPCO Security Technologies

Napco Security Technologies, Inc. develops, manufactures, and sells electronic security systems for commercial, residential, institutional, industrial, and governmental applications in the United States and internationally. Its access control systems include various types of identification readers, control panels, PC-based computers, and electronically activated door-locking devices; intrusion and fire alarm systems, consists of various detectors, a control panel, a digital keypad and signaling equipment; and door locking devices comprise microprocessor-based electronic door locks with push button, card readers and bio-metric operation, door alarms, mechanical door locks, and simple dead bolt locks. The company’s alarm systems include automatic communicators, cellular communication devices, control panels, combination control panels/digital communicators and digital keypad systems, fire alarm control panels, and area detectors; and video surveillance systems comprise video cameras, control panels, video monitors, or PCs. It also buys and resells various identification readers, video cameras, PC-based computers, and various peripheral equipment for access control and video surveillance systems; offers school security products; and markets peripheral and related equipment manufactured by other companies. The company markets and sells its products to independent distributors, dealers, and installers of security equipment. Napco Security Technologies, Inc. was founded in 1969 and is headquartered in Amityville, New York.

About Eastern

The Eastern Company designs, manufactures, and sells engineered solutions to industrial markets in the United States and internationally. The company offers turnkey returnable packaging solutions, which are used in the assembly processes of vehicles, aircraft, and durable goods, as well as in production processes of plastic packaging products, packaged consumer goods, and pharmaceuticals; designs and manufactures blow mold tools and injection blow mold tooling products, and 2-step stretch blow molds and related components for the stretch blow molding industry; and supplies blow molds and change parts to the food, beverage, healthcare, and chemical industries. It also provides rotary latches, compression latches, draw latches, hinges, camlocks, key switches, padlocks, and handles; and development and program management services for custom electromechanical and mechanical systems for original equipment manufacturers (OEMs) and customer applications. In addition, the company designs and manufactures proprietary vision technology for OEMs and aftermarket applications, as well as offers aftermarket components to the heavy- and medium-duty truck, motorhome, and bus markets. The Eastern Company was founded in 1858 and is based in Shelton, Connecticut.