Novanta (NOVT) AI Stock Analysis

194 Followers

Top Page

Novanta

(NASDAQ:NOVT)

68Neutral

Novanta's strong financial performance and positive earnings call guidance highlight its growth potential, particularly with new product launches. However, the stock's technical indicators suggest bearish momentum, and its high valuation may limit upside potential. Market uncertainties and challenges in certain segments pose risks.

Positive Factors

Design Wins

Novanta reported 40% growth in design wins in the fourth quarter, and the vitality index improved.

Product Launches

New product wins, including increased content in existing customers’ systems and new customer acquisitions, should drive growth in 2025.

Revenue Growth

Recent commentary from several companies operating in Novanta’s end-markets leads to expectations of continued momentum in the company’s medical and robotics/automation businesses.

Negative Factors

Customer Decisions

Discrete customer decisions to defer ramps on new product introductions and capital goods demand softness are contributing to the revisions.

Medical Solutions

Medical solutions sales declined 4% year-over-year organically in the fourth quarter due to a decline in sales to a DNA sequencing customer and continued weakness in the life sciences end-market.

Outlook

Management issued a cautious outlook for fourth quarter 2024, including a pause in DNA sequencing technology orders and the delay of some orders in the robotic surgery and semiconductor markets.

Novanta (NOVT) vs. S&P 500 (SPY)

Market Cap

$4.24B

Dividend YieldN/A

Average Volume (3M)326.72K

Price to Earnings (P/E)66.4

Beta (1Y)1.74

Revenue Growth7.67%

EPS Growth-12.33%

CountryUS

Employees3,000

SectorTechnology

Sector Strength40

IndustryHardware, Equipment & Parts

Share Statistics

EPS (TTM)1.77

Shares Outstanding35,960,636

10 Day Avg. Volume473,382

30 Day Avg. Volume326,721

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)5.06

Price to Cash Flow (P/CF)19.50

P/FCF Ratio20.20

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$160.00

Price Target Upside35.78% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering2

Novanta Business Overview & Revenue Model

Company DescriptionNovanta Inc. is a leading technology solutions provider that designs, manufactures, and sells precision photonic and motion control components and subsystems. The company primarily serves original equipment manufacturers (OEMs) in the medical, industrial, and microelectronics sectors. Novanta's core products include laser systems, beam delivery components, and precision motion systems, all of which are integral to the advanced equipment used in these industries.

How the Company Makes MoneyNovanta makes money through its diverse portfolio of precision components and systems, which are sold to OEMs across a variety of high-tech industries. The company's revenue streams are mainly derived from the sale of laser-based products, vision technologies, and precision motion solutions. These products are critical to the performance and efficiency of equipment used in medical procedures, industrial automation, and semiconductor manufacturing. Novanta partners with leading OEMs, leveraging its expertise in photonics and motion control to integrate its technologies into their products, thereby enhancing the end-user's capabilities and performance. Additionally, Novanta focuses on innovation and strategic acquisitions to bolster its product offerings and maintain a competitive edge in the market.

Novanta Financial Statement Overview

Summary

Novanta demonstrates strong financial health with solid revenue growth and profitability. The balance sheet is stable with moderate leverage, and cash flow management is efficient. However, there is potential to enhance operational efficiency and optimize debt levels.

Income Statement

Very Positive

Novanta has demonstrated strong revenue growth with Total Revenue increasing from $590.6M in 2020 to $949.2M in 2024, indicating a robust upward trajectory. The Gross Profit Margin and Net Profit Margin have remained solid, with the latter improving over recent years. However, the EBIT and EBITDA margins have shown stability rather than significant improvement, indicating consistent profitability but with room for enhancing operational efficiency.

Balance Sheet

Positive

The company's balance sheet is stable with a moderate Debt-to-Equity Ratio, reflecting balanced leverage. Stockholders' Equity has strengthened over the years, improving the Equity Ratio. The Return on Equity (ROE) is healthy, indicating efficient use of equity, but there is potential to optimize debt levels further to enhance financial flexibility.

Cash Flow

Very Positive

Novanta's cash flow position is strong with consistent positive Free Cash Flow and Operating Cash Flow, which have shown growth alongside revenue. The Free Cash Flow to Net Income Ratio is robust, indicating strong cash conversion efficiency. However, the variability in Free Cash Flow Growth Rate suggests some fluctuations in cash generation.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
949.25M	881.66M	860.90M	706.79M	590.62M
	Gross Profit
421.55M	399.90M	378.47M	300.33M	244.52M
	EBIT
110.58M	110.50M	103.08M	100.22M	55.89M
	EBITDA
179.86M	169.92M	160.99M	126.49M	98.07M
	Net Income Common Stockholders
64.09M	72.88M	74.05M	50.33M	44.52M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
113.99M	105.05M	100.11M	117.39M	125.05M
	Total Assets
1.39B	1.23B	1.24B	1.23B	865.18M
	Total Debt
467.07M	404.56M	476.27M	480.16M	233.24M
	Net Debt
353.08M	299.51M	376.17M	362.76M	108.18M
	Total Liabilities
642.81M	552.60M	663.63M	706.59M	388.37M
	Stockholders Equity
745.70M	673.46M	577.59M	521.29M	476.81M
Cash Flow		Free Cash Flow
141.35M	100.11M	71.14M	74.65M	129.72M
	Operating Cash Flow
158.51M	120.08M	90.78M	94.63M	140.24M
	Investing Cash Flow
-208.19M	-19.89M	-42.54M	-306.70M	-13.16M
	Financing Cash Flow
56.94M	-97.85M	-60.15M	204.75M	-84.36M

Novanta Technical Analysis

Technical Analysis Sentiment

Negative

Last Price117.84

Price Trends

50DMA

137.75

Negative

100DMA

148.34

Negative

200DMA

161.01

Negative

Market Momentum

MACD

-3.75

Positive

RSI

30.76

Neutral

STOCH

15.21

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NOVT, the sentiment is Negative. The current price of 117.84 is below the 20-day moving average (MA) of 127.47, below the 50-day MA of 137.75, and below the 200-day MA of 161.01, indicating a bearish trend. The MACD of -3.75 indicates Positive momentum. The RSI at 30.76 is Neutral, neither overbought nor oversold. The STOCH value of 15.21 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for NOVT.

Novanta Risk Analysis

Novanta disclosed 38 risk factors in its most recent earnings report. Novanta reported the most risks in the “Legal & Regulatory” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Novanta Peers Comparison

Overall Rating

UnderperformOutperform

Sector (57)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ESE	80 Outperform	$3.92B	35.63	9.22%	0.23%	8.94%	18.56%
PLXS	73 Outperform	$3.37B	28.86	9.27%	―	-3.53%	-3.90%
NOVT	68 Neutral	$4.24B	66.43	9.03%	―	7.67%	-12.33%
MKSI	68 Neutral	$4.94B	26.04	7.93%	1.50%	-0.99%	―
CGNX	66 Neutral	$4.37B	41.91	7.03%	1.33%	9.19%	-5.77%
VNT	63 Neutral	$4.64B	11.37	43.49%	0.36%	-3.75%	13.76%
Sector *	57 Neutral	$20.31B	10.03	-14.49%	2.79%	5.15%	-23.76%

* Technology Sector Average

Performance Comparison

NOVT

Novanta

117.84

-49.60

-29.62%

CGNX

Cognex

25.78

-15.20

-37.09%

ESE

Esco Technologies

151.92

48.39

46.74%

MKSI

MKS Instruments

73.20

-53.19

-42.08%

PLXS

Plexus

124.45

27.27

28.06%

VNT

Vontier

31.22

-10.72

-25.56%

Novanta Earnings Call Summary

Earnings Call Date: Feb 25, 2025 | % Change Since: -14.79% | Next Earnings Date: May 6, 2025

Earnings Call Sentiment Positive

The earnings call highlighted Novanta's robust financial performance with record cash flow, strong bookings growth, and a strategic focus on new product launches. However, challenges remain in the form of market uncertainties, especially in the life sciences and precision medicine segments. Despite these challenges, the company remains optimistic about 2025 growth driven by innovation and strategic acquisitions.

Highlights

Record Cash Flow Generation

Novanta achieved a record $62 million in operating cash flow for the fourth quarter, up 58% year over year, and a record $159 million for the full year 2024, up 32% from 2023.

Strong Bookings Growth

Bookings grew 54% year over year and 5% sequentially in the fourth quarter, driven by major OEM customers confirming their 2025 new product launches.

New Product Launches and Innovation

Novanta launched fifty new products in 2024 and has plans to launch 50% more in 2025. The company expects $50 million of incremental new product revenue for 2025.

Adjusted EBITDA Growth

Adjusted EBITDA grew 15% year over year to $52 million in the fourth quarter and 7% to $210 million for the full year 2024.

Gross Margin Expansion

Core businesses achieved adjusted gross margin expansion of 125 basis points in the fourth quarter and 120 basis points for the full year 2024.

Lowlights

DNA Sequencing and Life Sciences Weakness

Continued weakness in DNA sequencing and life sciences applications contributed to a 4% organic decline in the medical solutions segment in the fourth quarter.

Geopolitical and Market Uncertainty

Geopolitical disruptions, trade war uncertainty, and US National Institute of Health funding cuts create a more uncertain environment for 2025.

Decline in Precision Medicine

The precision medicine business line saw continued weakness with a book-to-bill ratio below one, affected by uncertainties in US NIH funding and trade actions.

Challenges in Automation Enabling Technologies

The automation enabling technologies segment reported a 2% sales decline for the full year 2024, reflecting softness in industrial capital spending.

Company Guidance

In the earnings call for Novanta Inc.'s fourth quarter and full year 2024, the company provided guidance for 2025, highlighting expectations for $50 million in incremental new product revenue, primarily from new insufflators and pumps for hospitals and surgical centers. The company forecasts a 5% overall revenue growth, targeting approximately $1 billion in GAAP revenue for 2025. Adjusted gross margins are expected to expand by 100 basis points, reaching roughly 47% to 47.5%. Novanta aims for an adjusted EBITDA between $225 million and $235 million, translating to a 23% EBITDA margin. The company projects adjusted earnings per share to range from $3.35 to $3.55, reflecting a 9% to 15% increase year over year. Furthermore, Novanta anticipates continued strong cash flow growth, with a cash conversion rate exceeding 100% of non-GAAP net income. The guidance remains conservative due to market uncertainties, including geopolitical disruptions and trade war impacts, but the company remains optimistic about its long-term growth prospects, driven by new product launches and strategic acquisitions.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.