Novanta (NOVT) has filed a shelf registration for up to 2,142,857 common shares, totaling about US$337.6 million. This filing gives the company flexibility to raise equity capital for future corporate uses.
See our latest analysis for Novanta.
At a share price of US$164.89, Novanta has seen a 48.36% year to date share price return and a 28.02% total shareholder return over one year. The recent 43.03% 90 day share price return suggests momentum has been building ahead of and around the shelf registration news.
If this capital raise has you thinking about where else growth stories might emerge in automation and related technologies, it could be worth scanning 29 robotics and automation stocks
After such a sharp move and a fresh shelf registration in place, the real tension for Novanta now is whether most of the easy upside has already played out or if the current valuation still leaves meaningful headroom.
Most Popular Narrative: 5.8% Undervalued
Against the last close of $164.89, the most followed narrative for Novanta points to a fair value of $175, putting the current price slightly below that mark and framing the Riverpoint acquisition and related equity raise as central to the long term earnings story.
The company's active pipeline of acquisitions, supported by a robust balance sheet and increased credit facility, is allowing it to continually enter new high growth, niche markets and increase its share of recurring, software driven revenue, catalyzing long term revenue growth and reducing earnings volatility.
Want to see what kind of revenue path, margin reset and future earnings multiple need to line up for that $175 figure to make sense? The full narrative spells out how recurring consumables, larger earnings, and a premium P/E assumption all have to work together for this valuation to hold.
Result: Fair Value of $175 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, there is still a clear risk that Novanta's reliance on acquisitions and exposure to US China trade tensions could unsettle the earnings path behind that $175 narrative.
Find out about the key risks to this Novanta narrative.
Another View on Novanta: Expensive on Earnings
The fair value narrative around $175 leans on future earnings power, but current market pricing tells a tighter story. At a P/E of 115.9x versus a fair ratio of 50.8x, and compared with 31.9x for the US Electronic industry and 55.4x for peers, Novanta screens as richly valued on today’s earnings. For investors, the question is whether future growth can close such a wide gap or if the market eventually moves the multiple closer to that fair ratio.
For a closer look at how this valuation stacks up against similar companies, run the numbers in our detailed earnings-based comparison and then weigh how much multiple compression risk you are comfortable with before making your own judgment on Novanta's setup See what the numbers say about this price — find out in our valuation breakdown..
Next Steps
If the mix of optimism and concern around Novanta feels finely balanced, consider moving quickly to review the underlying data and weigh up the 1 key reward and 1 important warning sign
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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.
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