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Novanta Inc (NOVT)
NASDAQ:NOVT
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Novanta
(NASDAQ:NOVT)
77Outperform
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
$4.64B
Dividend YieldN/A
Average Volume (3M)269.74K
Price to Earnings (P/E)72.8
Beta (1Y)1.66
Revenue Growth7.67%
EPS Growth-12.33%
CountryUS
Employees3,000
SectorTechnology
Sector Strength44
IndustryHardware, Equipment & Parts
Share Statistics
EPS (TTM)1.77
Shares Outstanding35,960,636
10 Day Avg. Volume229,865
30 Day Avg. Volume269,738
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
$160.00Price Target Upside25.13% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
Novanta Business Overview & Revenue Model
Company DescriptionNovanta Inc., together with its subsidiaries, designs, manufactures, markets, and sells photonics, vision, and precision motion components and sub-systems to original equipment manufacturers in the medical and industrial markets worldwide. The company's Photonics segment offers photonics-based solutions, including laser scanning and beam delivery, CO2 laser, solid state laser, ultrafast laser, and optical light engine products serving photonics-based applications for industrial processing, metrology, medical and life science imaging, DNA sequencing, and medical laser procedures. It's Vision segment provides a range of medical grade technologies, including medical insufflators, pumps, and related disposables; visualization solutions; wireless technologies, video recorders, and video integration technologies for operating room integrations; optical data collection and machine vision technologies; radio frequency identification technologies; thermal chart recorders; spectrometry technologies; and embedded touch screen solutions. In addition, its Precision Motion segment offers optical and inductive encoders, precision motors, servo drives and motion control solutions, integrated stepper motors, intelligent robotic end-of-arm technology solutions, air bearings, and air bearing spindles. The company sells its products through its direct sales force, resellers, distributors, and system integrators under the Cambridge Technology, Synrad, Laser Quantum, ARGES, WOM, NDS, NDSsi, Med X Change, Reach Technology, JADAK, ThingMagic, Photo Research, Celera Motion, MicroE, Zettlex, Applimotion, Ingenia, and Westwind brands. The company was formerly known as GSI Group, Inc. and changed its name to Novanta Inc. in May 2016. Novanta Inc. was founded in 1968 and is headquartered in Bedford, Massachusetts.
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
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.85
Very Positive
Balance Sheet
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.78
Positive
Cash Flow
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.82
Very Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| 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
Negative
127.87
Price Trends
142.61
Negative
152.71
Negative
162.76
Negative
Market Momentum
-3.49
Positive
31.20
Neutral
16.16
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 127.87 is below the 20-day moving average (MA) of 136.38, below the 50-day MA of 142.61, and below the 200-day MA of 162.76, indicating a bearish trend. The MACD of -3.49 indicates Positive momentum. The RSI at 31.20 is Neutral, neither overbought nor oversold. The STOCH value of 16.16 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 (58)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $4.64B | 72.76 | 9.03% | ― | 7.67% | -12.33% | |
73 Outperform | $13.36B | 24.87 | 20.29% | 0.58% | 5.52% | 16.59% | |
65 Neutral | $5.50B | 29.03 | 7.93% | 1.08% | -0.99% | ― | |
62 Neutral | $5.08B | 48.79 | 7.03% | 1.03% | 9.19% | -5.77% | |
58 Neutral | $21.03B | 10.58 | -16.29% | 2.47% | 4.38% | -23.63% | |
53 Neutral | $10.19B | ― | 0.88% | ― | 14.61% | 85.44% | |
50 Neutral | $4.33B | ― | -48.63% | ― | -1.72% | -94.98% |
* Technology Sector Average
Performance Comparison
NOVT
Novanta
127.87
-44.28
-25.72%
CGNX
Cognex
29.83
-11.59
-27.98%
COHR
Coherent Corp
64.94
4.94
8.23%
MKSI
MKS Instruments
80.15
-51.42
-39.08%
TER
Teradyne
82.60
-29.90
-26.58%
LITE
Lumentum Holdings
62.34
14.19
29.47%
Novanta Earnings Call Summary
Earnings Call Date: Feb 25, 2025 | % Change Since: -7.54% | Next Earnings Date: May 13, 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.