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Novanta Inc. Just Missed Earnings And Its EPS Looked Sad - But Analysts Have Updated Their Models

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Simply Wall St
·4 min read
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Last week, you might have seen that Novanta Inc. (NASDAQ:NOVT) released its full-year result to the market. The early response was not positive, with shares down 4.1% to US$90.15 in the past week. It looks like the results were a bit of a negative overall. While revenues of US$626m were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 9.8% to hit US$1.15 per share. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Novanta

NasdaqGS:NOVT Past and Future Earnings, February 28th 2020
NasdaqGS:NOVT Past and Future Earnings, February 28th 2020

Taking into account the latest results, the current consensus from Novanta's three analysts is for revenues of US$645.2m in 2020, which would reflect an okay 3.1% increase on its sales over the past 12 months. Statutory earnings per share are expected to leap 56% to US$1.81. Before this earnings report, analysts had been forecasting revenues of US$656.1m and earnings per share (EPS) of US$1.87 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a minor downgrade to their earnings per share forecasts.

The consensus price target held steady at US$100.00, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Novanta analyst has a price target of US$114 per share, while the most pessimistic values it at US$86.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.

Further, we can compare these estimates to past performance, and see how Novanta forecasts compare to the wider market's forecast performance. It's pretty clear that analysts expect Novanta's revenue growth will slow down substantially, with revenues next year expected to grow 3.1%, compared to a historical growth rate of 14% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 5.2% per year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Novanta to grow slower than the wider market.

The Bottom Line

The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Novanta. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$100.00, with the latest estimates not enough to have an impact on analysts' estimated valuations.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Novanta going out to 2021, and you can see them free on our platform here.

You can also view our analysis of Novanta's balance sheet, and whether we think Novanta is carrying too much debt, for free on our platform here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.