Stock Analysis

What Does Novanta Inc.'s (NASDAQ:NOVT) Share Price Indicate?

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NasdaqGS:NOVT
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Novanta Inc. (NASDAQ:NOVT), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$158 at one point, and dropping to the lows of US$116. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Novanta's current trading price of US$116 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Novanta’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

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What's The Opportunity In Novanta?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 1.88% above my intrinsic value, which means if you buy Novanta today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $113.51, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Novanta’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Novanta?

earnings-and-revenue-growth
NasdaqGS:NOVT Earnings and Revenue Growth October 3rd 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Novanta's earnings over the next few years are expected to increase by 53%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in NOVT’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on NOVT, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Novanta at this point in time. Every company has risks, and we've spotted 1 warning sign for Novanta you should know about.

If you are no longer interested in Novanta, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

What are the risks and opportunities for Novanta?

Novanta 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.

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Rewards

  • Earnings are forecast to grow 15.22% per year

  • Earnings grew by 47.5% over the past year

Risks

  • Debt is not well covered by operating cash flow

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Share Price

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About NasdaqGS:NOVT

Novanta

Novanta 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 Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation0
Future Growth2
Past Performance5
Financial Health2
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Solid track record with limited growth.