- If you are wondering whether Novanta is priced attractively right now, you are not alone. The stock has had a mixed run that raises fair questions about what you are really paying for.
- At a last close of US$134.43, the shares are up 21.0% year to date, even though the 7 day return is a 7.9% decline and the 1 year return sits at a 7.1% decline.
- Recent price moves sit against a backdrop of ongoing coverage of Novanta's position in the US tech sector and its role in providing precision technologies to its customers. This context helps explain why investors may be reassessing both the company’s growth potential and the level of risk they are comfortable with.
- According to Simply Wall St’s valuation checks, Novanta scores 0 out of 6 on being undervalued. Next we will look at how different valuation methods treat the stock and then finish by talking about a more complete way to think about valuation beyond a single score.
Novanta scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Novanta Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model estimates what a business might be worth by projecting the cash it could generate in the future and then discounting those cash flows back to today’s value.
For Novanta, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flows in US$. The latest twelve month free cash flow is about $45.66 million. Analysts have provided forecasts out to 2027, with Simply Wall St extending those projections further. For example, forecast free cash flow for 2026 is $158.70 million and for 2027 it is $180.80 million, with additional years extrapolated through to 2035 using estimated growth rates.
When all those projected cash flows are discounted back and summed, the model arrives at an estimated intrinsic value of about $110.80 per share. Against the recent share price of $134.43, the DCF implies that Novanta is around 21.3% overvalued on this measure.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Novanta may be overvalued by 21.3%. Discover 46 high quality undervalued stocks or create your own screener to find better value opportunities.
Approach 2: Novanta Price vs Earnings
P/E is a common way to value profitable companies because it ties what you pay directly to what the business is currently earning. In general, higher expected earnings growth and lower perceived risk can justify a higher P/E, while slower growth or higher risk usually points to a lower, more conservative range.
Novanta is trading on a P/E of 89.11x. That sits above the Electronic industry average of 27.20x and also above the selected peer average of 60.64x. Simply Wall St also calculates a proprietary “Fair Ratio” of 37.91x for Novanta. This is an estimate of the P/E you might expect given the company’s earnings profile, industry, profit margins, market cap and risk factors.
Compared with simple peer or industry comparisons, the Fair Ratio is designed to be more tailored to the company itself, because it adjusts for differences in growth, profitability and risk instead of assuming all firms should trade on similar multiples. With Novanta’s actual P/E of 89.11x sitting well above the 37.91x Fair Ratio, this framework suggests the shares are pricing in a higher earnings multiple than the model supports.
Result: OVERVALUED
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Upgrade Your Decision Making: Choose your Novanta Narrative
Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St’s Community page you can use Narratives to write your own story for Novanta, link that story to your assumptions for future revenue, earnings, margins and fair value, and then compare that Fair Value with today’s share price to help you decide whether the stock looks expensive or attractive. The Narrative will refresh when new news or earnings arrive. One investor might plug in the analyst-style view that supports a Fair Value of about US$154, while another, more cautious investor could enter lower growth or margin assumptions and arrive at a meaningfully lower figure. This gives each of them a clear, consistent way to act on their own view rather than relying on a single P/E or DCF output.
Do you think there's more to the story for Novanta? Head over to our Community to see what others are saying!
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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