NATIONAL PRESTO INDUSTRIES INC 10-K Analysis & Summary – 3/14/2025

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National Presto Industries, Inc

10-K

Annual report

Filing date:

03/14/2025

TLDR:

ELI5:

National Presto made more money this year selling things like kitchen appliances and defense products. Their defense business is doing really well, but they had a computer security problem that they need to fix.

Accession #:

0001437749-25-007735

Published on

March 16, 2025

Analyst Summary

NPK experienced significant revenue growth in 2024, driven primarily by the Defense segment, with the Housewares/Small Appliance segment also contributing.
Gross and net profit margins expanded, indicating improved operational efficiency and cost management, with a favorable LIFO inventory adjustment in the Housewares/Small Appliance segment contributing to gross margin improvement.
The Defense segment is the primary revenue and profit generator, while the Safety segment continues to operate at a loss.
A cybersecurity incident disclosed on March 1, 2025, is a significant concern with potential material impact on the company’s financial condition and results of operations.
Cash position decreased substantially due to increased inventory and dividend payments.
Gross Profit Margin increased to 20.23% from 19.78% in 2023.
Operating Profit Margin increased to 11.65% from 10.28% in 2023.
Net Profit Margin increased to 10.68% from 10.14% in 2023.
Return on Assets (ROA) increased to 9.15% from 7.84% in 2023.
Return on Equity (ROE) increased to 11.28% from 9.70% in 2023.
Basic and Diluted Earnings Per Share (EPS) increased to $5.82 from $4.86 in 2023.
Current Ratio decreased slightly to 4.93 from 5.00 in 2023.
Quick Ratio (Acid-Test Ratio) decreased to 0.92 from 1.22 in 2023.
Cash Ratio decreased significantly to 0.30 from 1.58 in 2023.
Debt-to-Equity Ratio decreased slightly to 0.23 from 0.24 in 2023.
Debt-to-Assets Ratio remained constant at 0.19.
Interest Coverage Ratio (Times Interest Earned) is very high at 25335.
Inventory Turnover decreased to 1.11 from 1.44 in 2023.
Days Sales Outstanding (DSO) increased to 58.80 from 52.13 in 2023.
Days Payable Outstanding (DPO) increased to 52.57 from 43.36 in 2023.
Asset Turnover increased to 0.86 from 0.77 in 2023.
Price-to-Earnings Ratio (P/E) is 15.30.
Price-to-Book Ratio (P/B) is 0.59.
Price-to-Sales Ratio (P/S) is 0.63.
Enterprise Value to EBITDA (EV/EBITDA) is 7.44.
Revenue Growth is 13.88%.
Net Income Growth is 20.00%.
EPS Growth is 19.75%.

Opportunities and Risks

Cybersecurity Incident: The recent cybersecurity incident poses a significant risk to NPK’s operations, data security, and financial performance.
Defense Spending: Dependence on U.S. government contracts makes the Defense segment vulnerable to changes in defense spending and government priorities.
Supply Chain Disruptions: Reliance on third-party suppliers in Asia for the Housewares/Small Appliance segment exposes the company to supply chain disruptions and increased costs.
Competition: The Housewares/Small Appliance segment operates in a highly competitive and price-sensitive environment.
Startup Risks: The Safety segment faces the inherent risks associated with startup businesses, including limited revenues and the need for significant investment in product development and marketing.
Defense Contract Backlog: The significant contract backlog in the Defense segment provides revenue visibility and growth potential.
New Product Development: Successful development and introduction of new products in the Housewares/Small Appliance and Safety segments can drive revenue growth and market share gains.
Acquisitions: Strategic acquisitions can expand NPK’s product offerings and market reach.

Potential Implications

Company Performance

The cybersecurity incident could negatively impact future financial performance if not properly addressed.
Continued success in securing and executing defense contracts is crucial for maintaining revenue growth.
The Safety segment needs to improve its financial performance to reduce losses and contribute to overall profitability.
Efficient management of the supply chain is essential for mitigating the risk of disruptions and increased costs.

Stock Price

The cybersecurity incident could negatively impact the stock price if investors perceive it as a significant threat.
Positive news regarding defense contracts and new product development could boost the stock price.
Overall financial performance and profitability will continue to be key drivers of the stock price.

National Presto Industries, Inc. (NPK) – 10-K Filing Analysis – FY2024

Executive Summary

This report analyzes National Presto Industries, Inc.’s (NPK) Form 10-K filing for the fiscal year ended December 31, 2024. NPK operates in three segments: Housewares/Small Appliance, Defense, and Safety. Overall, the company demonstrated revenue growth and improved profitability compared to the prior year. However, a recent cybersecurity incident disclosed in the filing introduces uncertainty. The Defense segment continues to be a significant revenue driver, while the Safety segment remains in a startup phase with limited revenues. Given the positive financial performance but the potential impact of the cybersecurity incident, a Hold rating is recommended. Further investigation into the cybersecurity incident is warranted.

Company Overview

National Presto Industries, Inc. is a diversified company operating in the housewares and small appliance, defense, and safety industries. The Housewares/Small Appliance segment designs, markets, and distributes a variety of kitchen and home comfort appliances. The Defense segment manufactures ammunition, precision mechanical and electro-mechanical assemblies, and performs related services for the U.S. government and prime contractors. The Safety segment focuses on developing and marketing safety-related products and technologies.

Detailed Analysis

Financial Statement Analysis

Key Ratios and Trends

Metric	2024	2023	2022	Trend
Revenue (USD thousands)	388,228	340,912	321,623	Increasing
Gross Profit (USD thousands)	78,566	67,452	55,125	Increasing
Gross Margin (%)	20.2%	19.8%	17.1%	Increasing
Net Income (USD thousands)	41,460	34,559	20,699	Increasing
Net Profit Margin (%)	10.7%	10.1%	6.4%	Increasing
Current Ratio	4.9	5.0	6.1	Slightly Decreasing

Revenue Growth: NPK experienced significant revenue growth in 2024, driven primarily by the Defense segment. The Housewares/Small Appliance segment also contributed to the increase, albeit at a smaller rate.

Improved Profitability: Gross and net profit margins expanded, indicating improved operational efficiency and cost management. A favorable LIFO inventory adjustment in the Housewares/Small Appliance segment contributed to the gross margin improvement.

Liquidity: The current ratio remains strong, indicating a healthy liquidity position. However, the slight decrease from 2022 to 2024 warrants monitoring.

Segment Performance

Segment	2024 Revenue (USD thousands)	2024 Operating Profit (USD thousands)	2023 Revenue (USD thousands)	2023 Operating Profit (USD thousands)
Housewares/Small Appliance	102,799	12,602	97,619	7,352
Defense	284,025	42,853	241,703	38,286
Safety	1,404	(10,242)	1,590	(10,605)

Defense Segment Dominance: The Defense segment is the primary revenue and profit generator for NPK. Continued contract wins and efficient operations are crucial for maintaining this performance.

Safety Segment Challenges: The Safety segment continues to operate at a loss, reflecting its startup nature. The segment’s success hinges on developing commercially viable products and achieving market acceptance.

Management’s Discussion and Analysis (MD&A) Insights

Management attributes the revenue increase to higher unit shipments in both the Housewares/Small Appliance and Defense segments. The improved gross profit in the Housewares/Small Appliance segment is attributed to increased sales, an improved product mix, and a favorable LIFO inventory adjustment.

Red Flags: The MD&A highlights the dependence of the Defense segment on U.S. government contracts and the potential impact of changes in defense spending. The reliance on third-party suppliers in Asia for the Housewares/Small Appliance segment also poses a risk of supply interruptions and increased costs.

Cybersecurity Incident: The disclosure of a cybersecurity incident on March 1, 2025, is a significant concern. While the full scope of the impact is unknown, management acknowledges the potential for a material impact on the company’s financial condition and results of operations. This requires further investigation and assessment.

Risk and Opportunity Assessment

Risks

Cybersecurity Incident: The recent cybersecurity incident poses a significant risk to NPK’s operations, data security, and financial performance.
Defense Spending: Dependence on U.S. government contracts makes the Defense segment vulnerable to changes in defense spending and government priorities.
Supply Chain Disruptions: Reliance on third-party suppliers in Asia for the Housewares/Small Appliance segment exposes the company to supply chain disruptions and increased costs.
Competition: The Housewares/Small Appliance segment operates in a highly competitive and price-sensitive environment.
Startup Risks: The Safety segment faces the inherent risks associated with startup businesses, including limited revenues and the need for significant investment in product development and marketing.

Opportunities

Defense Contract Backlog: The significant contract backlog in the Defense segment provides revenue visibility and growth potential.
New Product Development: Successful development and introduction of new products in the Housewares/Small Appliance and Safety segments can drive revenue growth and market share gains.
Acquisitions: Strategic acquisitions can expand NPK’s product offerings and market reach.

Conclusion and Actionable Insights

National Presto Industries, Inc. demonstrated solid financial performance in FY2024, driven by revenue growth and improved profitability. The Defense segment remains a key revenue driver, while the Safety segment faces ongoing challenges. The recent cybersecurity incident introduces uncertainty and requires further investigation. Given these factors, a Hold rating is recommended.

Recommendations

Investigate Cybersecurity Incident: Conduct a thorough investigation into the cybersecurity incident to assess the full scope of the impact and implement appropriate remediation measures.
Monitor Defense Spending: Closely monitor U.S. government defense spending and contract opportunities to mitigate the risk of changes in government priorities.
Diversify Supply Chain: Explore opportunities to diversify the supply chain for the Housewares/Small Appliance segment to reduce reliance on third-party suppliers in Asia.
Evaluate Safety Segment Strategy: Re-evaluate the strategy for the Safety segment to identify opportunities to improve its financial performance and achieve market acceptance.

1. Commentary

National Presto Industries experienced a mixed financial performance in 2024. Revenue increased significantly, driven primarily by the Defense segment, but net earnings saw a more modest rise. The company’s cash position decreased substantially due to increased inventory and dividend payments. While profitability metrics generally improved, the large cash outflow is a point of concern.

2. Financial Ratio and Metric Analysis

Profitability

Gross Profit Margin
- Metric: 20.23% (2024: $78,566 / $388,228)
- Trend: Increased from 19.78% in 2023 ($67,452 / $340,912). Percentage change: 2.27%
- Industry: The industry average gross profit margin for household appliances is around 25-35%. National Presto’s margin is below this average, suggesting potential issues with cost control or pricing strategy.
Operating Profit Margin
- Metric: 11.65% (2024: $45,213 / $388,228)
- Trend: Increased from 10.28% in 2023 ($35,033 / $340,912). Percentage change: 13.39%
- Industry: An operating profit margin of 11.65% is decent, but could be improved.
Net Profit Margin
- Metric: 10.68% (2024: $41,460 / $388,228)
- Trend: Increased from 10.14% in 2023 ($34,559 / $340,912). Percentage change: 5.33%
- Industry: A net profit margin around 10% is generally considered healthy.
Return on Assets (ROA)
- Metric: 9.15% (2024: $41,460 / $453,397)
- Trend: Increased from 7.84% in 2023 ($34,559 / $440,536). Percentage change: 16.71%
- Industry: The ROA is good, indicating efficient asset utilization.
Return on Equity (ROE)
- Metric: 11.28% (2024: $41,460 / $367,627)
- Trend: Increased from 9.70% in 2023 ($34,559 / $356,256). Percentage change: 16.29%
- Industry: The ROE is good, indicating efficient equity utilization.
Earnings Per Share (EPS) – Basic and Diluted
- Metric: $5.82
- Trend: Increased from $4.86 in 2023. Percentage change: 19.75%
- Industry: N/A

Liquidity

Current Ratio
- Metric: 4.93 (2024: $366,661 / $74,436)
- Trend: Increased from 5.00 in 2023 ($360,110 / $72,019). Percentage change: -1.40%
- Industry: A current ratio above 2 is generally considered healthy.
Quick Ratio (Acid-Test Ratio)
- Metric: 0.92 (2024: ($366,661 – $277,999) / $74,436)
- Trend: Decreased from 1.22 in 2023 (($360,110 – $190,420) / $72,019). Percentage change: -24.59%
- Industry: A quick ratio of around 1 is generally considered healthy.
Cash Ratio
- Metric: 0.30 (2024: ($17,663 + $5,010) / $74,436)
- Trend: Decreased from 1.58 in 2023 (($87,657 + $26,454) / $72,019). Percentage change: -81.01%
- Industry: A cash ratio of 0.30 is low, indicating the company may have difficulty meeting its short-term obligations with cash alone.

Solvency/Leverage

Debt-to-Equity Ratio
- Metric: 0.23 (2024: $85,770 / $367,627)
- Trend: Increased from 0.24 in 2023 ($84,280 / $356,256). Percentage change: -4.17%
- Industry: A debt-to-equity ratio below 1 is generally considered healthy.
Debt-to-Assets Ratio
- Metric: 0.19 (2024: $85,770 / $453,397)
- Trend: Increased from 0.19 in 2023 ($84,280 / $440,536). Percentage change: 0%
- Industry: A debt-to-assets ratio below 0.5 is generally considered healthy.
Interest Coverage Ratio (Times Interest Earned)
- Metric: 25335 (2024: $50,670 / $2)
- Trend: N/A
- Industry: A high-interest coverage ratio indicates the company can easily cover its interest expenses.

Activity/Efficiency

Inventory Turnover
- Metric: 1.11 (2024: $309,662 / (($277,999 + $190,420) / 2))
- Trend: Increased from 1.44 in 2023 ($273,460 / (($190,420 + $196,039)/2)). Percentage change: -23.06%
- Industry: A low inventory turnover suggests the company may have difficulty selling its inventory.
Days Sales Outstanding (DSO)
- Metric: 58.80 (2024: ($62,289 / $388,228) * 365)
- Trend: Increased from 52.13 in 2023 (($48,727 / $340,912) * 365). Percentage change: 12.80%
- Industry: A high DSO suggests the company may have difficulty collecting its receivables.
Days Payable Outstanding (DPO)
- Metric: 52.57 (2024: ($44,625 / $309,662) * 365)
- Trend: Increased from 43.36 in 2023 (($32,572 / $273,460) * 365). Percentage change: 21.24%
- Industry: A high DPO suggests the company is taking longer to pay its suppliers.
Asset Turnover
- Metric: 0.86 (2024: $388,228 / $453,397)
- Trend: Increased from 0.77 in 2023 ($340,912 / $440,536). Percentage change: 11.69%
- Industry: An asset turnover of 0.86 is low, suggesting the company is not efficiently using its assets to generate revenue.

Valuation

Price-to-Earnings Ratio (P/E)
- Metric: 15.30 (2025-03-14: $89.01 / $5.82)
- Trend: N/A
- Industry: The average P/E ratio for the market is around 20-25. National Presto’s P/E ratio is below this average, suggesting the company may be undervalued.
Price-to-Book Ratio (P/B)
- Metric: 0.59 (2025-03-14: $89.01 / ($367,627/7105.595))
- Trend: N/A
- Industry: A P/B ratio below 1 suggests the company may be undervalued.
Price-to-Sales Ratio (P/S)
- Metric: 0.63 (2025-03-14: (7105.595 * $89.01) / $388,228)
- Trend: N/A
- Industry: A P/S ratio below 1 is generally considered good.
Enterprise Value to EBITDA (EV/EBITDA)
- Metric: 7.44 (2025-03-14: (7105.595 * $89.01 + $85,770 – $17,663 – $5,010) / ($41,460 + $9,210 + $3,531 + $1,515))
- Trend: N/A
- Industry: An EV/EBITDA ratio of 7.44 is low, suggesting the company may be undervalued.

Growth Rates

Revenue Growth
- Metric: 13.88% (2024: ($388,228 – $340,912) / $340,912)
- Trend: N/A
- Industry: N/A
Net Income Growth
- Metric: 20.00% (2024: ($41,460 – $34,559) / $34,559)
- Trend: N/A
- Industry: N/A
EPS Growth
- Metric: 19.75% (2024: ($5.82 – $4.86) / $4.86)
- Trend: N/A
- Industry: N/A

Other Relevant Metrics

Segment Performance
- The Defense segment is the primary revenue driver, accounting for a significant portion of total sales. The Safety segment continues to operate at a loss.