With EPS Growth And More, Novanta (NASDAQ:NOVT) Makes An Interesting Case

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Novanta (NASDAQ:NOVT). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Novanta with the means to add long-term value to shareholders.

See our latest analysis for Novanta

How Fast Is Novanta Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. We can see that in the last three years Novanta grew its EPS by 4.2% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that Novanta is growing revenues, and EBIT margins improved by 2.5 percentage points to 13%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Novanta's future profits.

Are Novanta Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Novanta followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have US$45m worth of shares. This considerable investment should help drive long-term value in the business. Even though that's only about 1.0% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does Novanta Deserve A Spot On Your Watchlist?

One positive for Novanta is that it is growing EPS. That's nice to see. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. These two factors are a huge highlight for the company which should be a strong contender your watchlists. You still need to take note of risks, for example - Novanta has 1 warning sign we think you should be aware of.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.