Assessing Novanta Inc’s (NASDAQ:NOVT) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess NOVT’s recent performance announced on 30 March 2018 and evaluate these figures to its long-term trend and industry movements. View out our latest analysis for Novanta
Was NOVT’s recent earnings decline indicative of a tough track record?NOVT’s trailing twelve-month earnings (from 30 March 2018) of US$12.07m has more than halved from US$22.00m in the prior year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 14.19%, indicating the rate at which NOVT is growing has slowed down. What could be happening here? Let’s examine what’s occurring with margins and whether the rest of the industry is feeling the heat.
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Over the past few years, revenue growth has not been able to catch up, which indicates that Novanta’s bottom line has been driven by unmaintainable cost-cutting. Eyeballing growth from a sector-level, the US electronic industry has been growing its average earnings by double-digit 15.94% in the past twelve months, and 10.05% over the past five years. This shows that whatever tailwind the industry is enjoying, Novanta has not been able to gain as much as its industry peers.In terms of returns from investment, Novanta has not invested its equity funds well, leading to a 10.94% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 2.76% is below the US Electronic industry of 6.01%, indicating Novanta’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Novanta’s debt level, has increased over the past 3 years from 8.03% to 10.22%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Usually companies that experience an extended period of decline in earnings are undergoing some sort of reinvestment phase in order to keep up with the recent industry expansion and disruption. I suggest you continue to research Novanta to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for NOVT’s future growth? Take a look at our free research report of analyst consensus for NOVT’s outlook.
- Financial Health: Is NOVT’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks herebag M10 shoulder shopping Brown Mademoiselle cm Zwei 31 1qIwtB5.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.