Can You Imagine How Elated Novanta's (NASDAQ:NOVT) Shareholders Feel About Its 837% Share Price Gain?

For many, the main point of investing in the stock market is to achieve spectacular returns. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held Novanta Inc. (NASDAQ:NOVT) shares for the last five years, while they gained 837%. If that doesn't get you thinking about long term investing, we don't know what will. Then again, the 9.5% share price decline hasn't been so fun for shareholders. This could be related to the soft market, with stocks down around 0.3% in the last month.

Anyone who held for that rewarding ride would probably be keen to talk about it.

Check out our latest analysis for Novanta

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Novanta achieved compound earnings per share (EPS) growth of 4.2% per year. This EPS growth is lower than the 56% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth. This optimism is visible in its fairly high P/E ratio of 100.40.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Novanta's earnings, revenue and cash flow.

A Different Perspective

Novanta shareholders have received returns of 77% over twelve months, which isn't far from the general market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 56%. It is possible that management foresight will bring growth well into the future, even if the share price slows down. It's always interesting to track share price performance over the longer term. But to understand Novanta better, we need to consider many other factors. Even so, be aware that Novanta is showing 1 warning sign in our investment analysis , you should know about...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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