Novanta (NOVT) AI Stock Analysis

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Novanta

(NASDAQ:NOVT)

Rating:74Outperform

Price Target:

$149.00

▲( 24.03% Upside)

Novanta's strong financial performance and strategic initiatives in high-growth markets, like surgical robotics, are key strengths. However, the stock is highly valued, and technical indicators suggest potential volatility. Challenges from trade tariffs and deferred revenues also pose risks. Overall, while Novanta is well-positioned for long-term growth, investors should consider short-term market uncertainties.

Positive Factors

Acquisition Impact

The acquisition of Keonn is expected to contribute significantly to Novanta's revenue and EBITDA.

End-Markets Strength

Strength in end-markets such as robotics, semiconductor, and surgery is offsetting other business line pressures.

Growth and Innovation

Novanta reported 40% growth in design wins in the fourth quarter, and the vitality index (percentage of sales from new products) improved.

Negative Factors

Budget Cuts Impact

The administration’s proposed 44% cut to the NIH’s budget is considered ominous news for Novanta.

Guidance Uncertainty

Novanta suspended 2025 revenue and EPS guidance due to extreme uncertainty from tariffs.

Trade War Risks

The escalating trade war with China could also result in a greater-than-expected headwind for Novanta.

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

Market Cap

$4.32B

Dividend YieldN/A

Average Volume (3M)310.09K

Price to Earnings (P/E)61.5

Beta (1Y)1.68

Revenue Growth6.52%

EPS Growth1.60%

CountryUS

Employees3,000

SectorTechnology

Sector Strength76

IndustryHardware, Equipment & Parts

Share Statistics

EPS (TTM)0.74

Shares Outstanding35,970,833

10 Day Avg. Volume326,467

30 Day Avg. Volume310,086

Financial Highlights & Ratios

PEG Ratio10.47

Price to Book (P/B)5.93

Price to Sales (P/S)0.00

P/FCF Ratio31.45

Enterprise Value/Market Cap1.11

Enterprise Value/Revenue1.30

Enterprise Value/Gross Profit11.33

Enterprise Value/Ebitda7.24

Forecast

1Y Price Target

$139.00

Price Target Upside15.71% 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 shows strong financial health with consistent revenue growth and solid profitability. The balance sheet is stable, and cash flow management is efficient. However, there's room for improving operational efficiency and optimizing leverage.

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
166.12M	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
471.00M	404.56M	476.27M	480.16M	233.24M
	Net Debt
357.01M	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 Price120.13

Price Trends

50DMA

123.06

Negative

100DMA

134.70

Negative

200DMA

153.33

Negative

Market Momentum

MACD

0.89

Positive

RSI

43.90

Neutral

STOCH

10.32

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 120.13 is below the 20-day moving average (MA) of 123.93, below the 50-day MA of 123.06, and below the 200-day MA of 153.33, indicating a bearish trend. The MACD of 0.89 indicates Positive momentum. The RSI at 43.90 is Neutral, neither overbought nor oversold. The STOCH value of 10.32 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 2 New Risks

Our operating results depend in part on our ability to contain or reduce costs. There is substantial price competition in our industry and upward pressure on material and labor costs. Our success and profitability will depend on our ability to maintain a competitive cost and price structure. Q4, 2024

The loss of sales, or significant reductions in orders from, any major customers may have a material adverse effect on us. Q4, 2024

Novanta Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PLXS	76 Outperform	$3.51B	25.19	10.93%	―	-0.69%	42.26%
VNT	75 Outperform	$5.21B	14.36	35.88%	0.28%	-3.59%	-11.30%
NOVT	74 Outperform	$4.32B	61.45	9.73%	―	6.52%	1.60%
ESE	74 Outperform	$4.61B	39.09	9.66%	0.18%	8.40%	20.03%
MKSI	71 Outperform	$5.62B	24.98	9.50%	1.05%	-1.14%	―
CGNX	64 Neutral	$4.99B	43.46	8.02%	1.04%	8.56%	18.99%
Sector *	61 Neutral	$11.29B	10.07	-7.05%	2.96%	7.47%	-10.75%

* Technology Sector Average

Performance Comparison

NOVT

Novanta

120.13

-42.78

-26.26%

CGNX

Cognex

29.72

-17.07

-36.48%

ESE

Esco Technologies

178.40

70.51

65.35%

MKSI

MKS Instruments

83.82

-46.20

-35.53%

PLXS

Plexus

129.57

16.91

15.01%

VNT

Vontier

35.26

-4.12

-10.46%

Novanta Earnings Call Summary

Earnings Call Date:May 06, 2025

(Q1-2025)

% Change Since: 0.10%|

Next Earnings Date:Aug 12, 2025

Earnings Call Sentiment Neutral

Novanta has demonstrated strong financial performance and strategic growth despite facing significant challenges from trade tariffs and market uncertainties. The company's proactive measures and strategic acquisitions position it well for long-term growth, though short-term challenges remain significant.

Q1-2025 Updates

Positive Updates

Revenue Growth and Strong Cash Flow

Novanta achieved $233 million in revenue for Q1 2025, representing 2% organic growth and 1% reported growth. The company also generated a robust $32 million in operating cash flows, maintaining a streak of strong cash flow conversion.

Successful Product Launches

The company confirmed $50 million of incremental new product revenue for 2025, driven by launches in surgical robotics, minimally invasive surgery applications, and other advanced technologies.

Strategic Acquisition

Novanta completed the acquisition of Keonn, an RFID solution provider, marking the first acquisition of 2025. This aligns with the strategy to expand into AI-enhanced software integrated with proprietary hardware.

Strong Performance in Medical Markets

Advanced Surgery business saw high single-digit growth due to strong patient procedure growth and hospital spending.

Innovative Technology Development

Novanta is making progress in markets like warehouse automation and precision robotics, with strong design win activity and new product sales growing in double digits.

Negative Updates

Impact of Trade Tariffs

Trade tariffs have increased manufacturing costs by approximately $20 million annually, creating significant challenges and necessitating mitigation strategies.

Revenue Deferrals to China

Approximately $35 million in expected revenue from U.S. manufactured products shipping to China has been deferred due to tariffs exceeding 100%.

Challenges in Precision Medicine

The precision medicine business unit faced disruptions from tariffs and funding cuts at the U.S. National Institute of Health, impacting sales.

Volatility in Global Capital Spending

Uncertainty in global trade and U.S. government spending cuts have led to deferred investments, affecting demand visibility, particularly in industrial and life sciences markets.

Company Guidance

During Novanta Inc.'s First Quarter 2025 Earnings Call, the company provided guidance focusing on maintaining its full-year adjusted EBITDA despite current market challenges. Novanta reported $233 million in revenue, reflecting organic growth of 2% and a reported growth of 1%, with adjusted gross margins at 46% and adjusted EBITDA at $50 million. The company achieved a strong operating cash flow of $32 million, marking the eighth consecutive quarter of cash flow conversion above 120% of net income. Novanta also highlighted a strategic focus on ramping new product launches to achieve $50 million in incremental revenue for 2025, driven by innovations in surgical robotics and minimally invasive surgery. The company's diversified business model, with exposure to high-growth medical and advanced industrial markets, is designed to withstand geopolitical and economic volatility. Although current trade uncertainties and tariffs have impacted revenue, Novanta's proactive mitigation strategies and cost containment measures aim to neutralize these effects, ensuring continued financial resilience and growth.

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.