However, the solid demand for products and solutions, driven by growing awareness about the security and safety of people and infrastructure, augurs well for the industry’s near-term prospects. Companies like Allegion plc ALLE, MSA Safety Incorporated MSA, ADT Inc. ADT and Alarm.com Holdings, Inc. ALRM are a few industry participants that are expected to capitalize on the opportunities.
Industry Description
The Zacks Security and Safety Services industry comprises firms 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 and military, federal, law enforcement and private security. Some of the companies 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 players 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.
3 Security & Safety Services Industry Trends in Focus
Rising Costs Hurt Margins: Industry participants have been encountering input cost inflation and other expenses, which have been denting profitability. The rise in expenses, along with a tough labor market, poses a threat to margins. That said, companies have been focused on cost management initiatives to mitigate cost-related challenges. These include streamlining operational structures, optimizing supply networks and implementing effective pricing policies.
High Debt Levels: Industry participants constantly focus on innovation, product upgrades and the development of new products to cater to the changing customer needs and stay competitive, 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. The industry’s long-term debt/capital ratio is currently 0.60, higher than the 0.27 of the Zacks S&P 500 composite index.
Healthy Demand for Security and Safety Services: Growing instances of terrorism and criminal activities, coupled with concerns related to the ever-increasing fraudulent activities, are driving demand for security and safety services. To enhance the safety and surveillance of people or assets, governments, commercial operations, communities and other establishments across the world are rapidly deploying IP-based cameras. This is acting as a key growth driver for the industry. With growing urbanization, the increasing requirement to ensure the safety and security of infrastructure at offices, factories and residential buildings is aiding industry participants. Also, with rising instances of hacking, the industry is seeing higher demand for Internet security products and services like firewalls, intrusion detection systems and intrusion prevention systems. People’s preference for purchasing products through e-commerce platforms has also opened up opportunities for industry players.
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 #174. This rank places it in the bottom 30% of 247 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates robust 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.
We will present a few stocks from the industry that you may want to consider for your portfolio. But before that, 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 Industrial Products sector and the S&P 500 composite index in the past year.
Over this period, the industry has moved down 11.1% against the S&P 500 Index’s increase of 22.8% and the sector’s growth of 18.5%.
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 12.43X compared with the S&P 500’s and the sector’s 21.02X and 21.37X, respectively.
Over the past five years, the industry has traded as high as 21.83X, as low as 12.05X and at the median of 16.84X, as the chart below shows:
Price-to-Earnings Ratio vs SP500
Price-to-Earnings Ratio vs Sector
4 Security and Safety Services Stocks to Keep a Tab on
Alarm.com: Based in Tysons, VA, the company provides various Internet of Things (IoT) solutions for residential, multi-family, small business and enterprise commercial markets in North America and internationally. 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, estimates for ALRM’s earnings have remained steady for 2026. Although this Zacks Rank #2 (Buy) company’s shares lost 2.2% in the past year, they rose 6.7% in the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: ALRM
Allegion: The Dublin, Ireland-based company is a leading provider of mechanical and electronic security products, including doors and door systems, electronic security products and biometric and mobile access control systems. It is well-positioned to benefit from strength in its Allegion Americas segment, driven by an increase in demand for non-residential products across end markets like education, healthcare, government, hospitality and retail. An increase in demand for electronic security products, driven by the growing awareness about the security and safety of people and infrastructure, is expected to drive ALLE’s performance in the quarters ahead.
In the past 30 days, estimates for this Zacks Rank #3 (Hold) company’s earnings have increased a penny for 2026. Although Allegion’s shares lost 8.8% in the past year, they rose 4.4% in the past month.
Price and Consensus: ALLE
ADT: Based in Boca Raton, FL, the company provides security, interactive and smart home solutions, including burglar and life safety alarms, smart security cameras, smart home automation systems and video surveillance systems, to residential and small business customers in the United States. ADT is gaining from strength in the Consumer and Small Business segment, driven by strong customer demand for monitoring and related services. Also, the company’s strategic initiatives, innovation and operational excellence bode well.
The Zacks Consensus Estimate for ADT’s 2026 earnings has remained steady in the past 60 days. Although shares of the Zacks Rank #3 stock declined 16.4% in the past year, they rose 7.3% in the past month.
Price and Consensus: ADT
MSA Safety: The company is engaged in the development, manufacture and supply of safety products that protect people and facility infrastructures. The company's core products include self-contained breathing apparatus, fixed gas and flame detection systems, air-purifying respirators and gas masks, among others. Strengthening demand for its fire service and detection products has 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, estimates for this Zacks Rank #3 company’s earnings have remained steady for 2026. Although shares of MSA Safety inched down 0.9% in the past year, they appreciated 5.5% in the past month.
Price and Consensus: MSA
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ADT Inc. (ADT): Free Stock Analysis Report
Allegion PLC (ALLE): Free Stock Analysis Report
MSA Safety Incorporporated (MSA): Free Stock Analysis Report
Alarm.com Holdings, Inc. (ALRM): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).