Last week saw the newest quarterly earnings release from Novanta Inc. (NASDAQ:NOVT), an important milestone in the company's journey to build a stronger business. Revenues were US$233m, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.59, an impressive 44% ahead of estimates. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

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Following the latest results, Novanta's four analysts are now forecasting revenues of US$988.3m in 2025. This would be a modest 3.8% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to bounce 26% to US$2.48. In the lead-up to this report, the analysts had been modelling revenues of US$998.4m and earnings per share (EPS) of US$2.40 in 2025. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

See our latest analysis for Novanta

The consensus price target fell 5.1% to US$154, suggesting the increase in earnings forecasts was not enough to offset other the analysts concerns. 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. There are some variant perceptions on Novanta, with the most bullish analyst valuing it at US$160 and the most bearish at US$143 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that Novanta's revenue growth will slow down substantially, with revenues to the end of 2025 expected to display 5.2% growth on an annualised basis. This is compared to a historical growth rate of 11% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 7.3% annually. Factoring in the forecast slowdown in growth, it seems obvious that Novanta is also expected to grow slower than other industry participants.

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The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Novanta following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Novanta's revenue is expected to perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Novanta going out to 2027, 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.

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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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