Measuring Novanta Inc.'s (NasdaqGS:NOVT) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess NOVT's recent performance announced on 31 December 2019 and compare these figures to its historical trend and industry movements.
Was NOVT's recent earnings decline worse than the long-term trend and the industry?
NOVT's trailing twelve-month earnings (from 31 December 2019) of US$41m has declined by -20% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 33%, indicating the rate at which NOVT is growing has slowed down. Why is this? Well, let's look at what's going on with margins and whether the entire industry is facing the same headwind.
In terms of returns from investment, Novanta has fallen short of achieving a 20% return on equity (ROE), recording 9.8% instead. Furthermore, its return on assets (ROA) of 5.7% is below the US Electronic industry of 6.1%, indicating Novanta's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Novanta’s debt level, has declined over the past 3 years from 12% to 9.9%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 53% to 53% over the past 5 years.
What does this mean?
Though Novanta's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors impacting its business. I recommend you continue to research Novanta to get a better picture 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: Are 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 here.
- 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.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.