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Novanta (NOVT): analysis traps
Where its figures could mislead a reader, and what to check before taking them at face value · Data: Q2 2026, to Jul 3, 2026, filed Aug 5, 2026; rules v1.1
Novanta (NOVT): 2 rules of 10 triggered on the filings to Jul 3, 2026: adjusted profit = economic profit; stock compensation added back = no economic cost. 1 to review; 2 not applicable. Each is a question to verify, with the normal explanation that would produce the same figures.
Check these first
Adjusted profit = economic profit Triggered · severity high · confidence low
Adjusted EPS was at least 10% above GAAP in 3 of the last 3 quarters (on average 56% above). Costs excluded every quarter (restructuring, stock compensation, amortisation of acquired intangibles, litigation) are a recurring cost of the business, not a one-off.
Innocent reading: A genuine one-off this year (an impairment, a settlement) that happens to span several quarters.
Stock compensation added back = no economic cost Triggered · severity medium · confidence high
Stock compensation was $30M, 3.0% of revenue, in FY2025; buybacks were $39M (1.3× the SBC) and the diluted share count still rose 1.6%. 'Adjusted' figures that add SBC back treat pay in shares as free; the cost is borne by every shareholder as dilution, or by the cash spent to buy the shares back.
Innocent reading: A young company paying in equity while it scales; intensity falls as revenue grows.
A precise DCF value = the true value To review · confidence high
The DCF's point value is 34.65 a share (price 136.66); 49% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from 28.31 to 41.00; across every method the research ran the range is -24 to 2,518. The value is a range; the decimals are not information.
Innocent reading: A stable, mature business with a narrow range of outcomes, where the point value is a fair summary.
Every rule
A01 FCF growth = the business improved Not triggered confidence high
Free cash flow did not rise ($141M → $48M): the trap does not arise.
The figures and how they are read
| Fiscal year before | FY2024 |
| Fiscal year | FY2025 |
| Operating cash flow, year before | $159M |
| Operating cash flow | $64M |
| Capex, year before | $17M |
| Capex | $16M |
| Free cash flow, year before | $141M |
| Free cash flow | $48M |
| Change in FCF | −$93M |
| Change in capex | −$2M |
| Working capital: change in its cash contribution | −$92M |
FCF = operating cash flow − cash capex; ΔFCF = ΔOCF − ΔCapEx; the working-capital part is the change in the cash-bridge items (receivables, inventory, payables, accruals), with the sign of the cash flow statement
Source: FY2025 (cash flow statement, fiscal year) · FY2024 (cash flow statement, fiscal year before)
A07 Stock compensation added back = no economic cost Triggered severity medium · confidence high
Stock compensation was $30M, 3.0% of revenue, in FY2025; buybacks were $39M (1.3× the SBC) and the diluted share count still rose 1.6%. 'Adjusted' figures that add SBC back treat pay in shares as free; the cost is borne by every shareholder as dilution, or by the cash spent to buy the shares back.
The figures and how they are read
| Fiscal year | FY2025 |
| Stock compensation | $30M |
| Revenue | $981M |
| SBC / revenue | +3.0% |
| Buybacks | $39M |
| Buybacks / SBC | 1.3 |
| Diluted shares, year before | 36.1M shares |
| Diluted shares | 36.7M shares |
| Diluted shares: change | +1.6% |
SBC / revenue from the cash flow statement's add-back; the diluted weighted share count year over year; buybacks from the financing section
Source: FY2025 (stock compensation, buybacks and the diluted share count, fiscal year)
What would explain it innocently
- A young company paying in equity while it scales; intensity falls as revenue grows
- Buybacks at prices below intrinsic value make up for the dilution over time
- A one-off grant (an acquisition, a founder award) rather than a steady level
What to look for in the filing
- The share count after the latest buybacks (the next 10-Q's cover)
- The price paid for the buybacks against the shares' value
- Unvested awards outstanding
What would show the trap does not apply
- The diluted share count falls over two years with buybacks at least equal to the stock compensation
- Stock compensation falls as a share of revenue in each of the next two years
Look again: next filing.
B02 Receivables growing = future cash is certain Not triggered confidence medium
Receivables grew 11% against revenue 10% in Q2 2026; DSO 60 against a median of 61: collections are keeping pace with sales.
The figures and how they are read
| Quarter | Q2 2026 |
| Revenue, year over year | +10.3% |
| Receivables, year over year | +10.9% |
| Quarter before | Q1 2026 |
| Revenue y/y, quarter before | +10.4% |
| Receivables y/y, quarter before | +5.9% |
| Days sales outstanding | 60.4 |
| DSO, median of eight quarters | 61.4 |
| Receivables | $179M |
| Revenue | $266M |
receivables and revenue against the same quarter a year earlier; DSO = receivables / quarterly revenue × days, against the median of the eight quarters before
Source: Q2 2026 (receivables and revenue) · Q2 2025 (the same quarter a year earlier)
B08 Adjusted profit = economic profit Triggered severity high · confidence low
Adjusted EPS was at least 10% above GAAP in 3 of the last 3 quarters (on average 56% above). Costs excluded every quarter (restructuring, stock compensation, amortisation of acquired intangibles, litigation) are a recurring cost of the business, not a one-off.
The figures and how they are read
| Quarter / adjusted EPS / GAAP EPS / gap | 2025-09-30 / 0.87 / 0.3 / 0.655; 2026-03-31 / 0.81 / 0.51 / 0.37; 2026-06-30 / 0.89 / 0.3 / 0.663 |
| Quarters with adjusted ≥ 10% above GAAP | 3 |
| Quarters compared | 3 |
| Latest gap | +66.3% |
the analysts' 'actual' (usually the company's adjusted EPS) against GAAP net income ÷ diluted shares for the matching quarter; a gap of 10% or more counts (the stand-in until three releases' reconciliation tables are on file)
Source: 2025-09-30 (adjusted 0.87 vs GAAP 0.30) · 2026-03-31 (adjusted 0.81 vs GAAP 0.51) · 2026-06-30 (adjusted 0.89 vs GAAP 0.30)
What would explain it innocently
- A genuine one-off this year (an impairment, a settlement) that happens to span several quarters
- Amortisation of acquired intangibles, which many investors also exclude by choice
- The analysts' 'actual' is not the company's own adjusted figure
What to look for in the filing
- The reconciliation table in the earnings release: which items, how much, how often
- Whether the same items were excluded in earlier years
What would show the trap does not apply
- The reconciliation shows the excluded items ending (a restructuring with its final charge, a settlement paid) and the gap to GAAP closes in the next quarters
- The excluded items are only amortisation of acquired intangibles and the cash paid for the deals is in the investing cash flow
Look again: next filing.
C02 Low net debt = no refinancing risk Not triggered confidence medium
$41M comes due within a year, 20.1× covered by cash and investments of $719M plus $114M of free cash flow.
The figures and how they are read
| Cash and investments | $719M |
| Debt | $230M |
| Net debt | −$489M |
| Due within a year | $41M |
| Read from | the current portion of debt on the balance sheet |
| Free cash flow, twelve months | $114M |
| Cash plus free cash flow | $833M |
| Coverage of what is due | 20.1 |
| Due in the second year | — |
| Balance sheet date | 2026-07-03 |
due within a year from the maturity table (else the current portion of debt), against cash and investments plus free cash flow over the last twelve months (zero if negative); no credit lines assumed
Source: 2026-07-03 (debt maturities, cash and investments)
D03 EPS growth = profit growth Not triggered confidence high
EPS rose 144% and net income rose 179% in Q2 2026; the share count rose 14.1%: EPS growth follows profit growth.
The figures and how they are read
| Quarter | Q2 2026 |
| Quarter before | Q2 2025 |
| EPS, year before | $0.12 |
| EPS | $0.30 |
| Net income, year before | $4M |
| Net income | $13M |
| Diluted shares, year before | 36.1M shares |
| Diluted shares | 41.2M shares |
| EPS growth | +144.0% |
| Net income growth | +178.9% |
| Diluted shares: change | +14.1% |
| eps from profit | $0.22 |
| eps from share count | -$0.04 |
EPS and net income against the same quarter a year earlier; the EPS bridge attributes the change to profit first, then to the share count (the order is fixed and disclosed)
Source: Q2 2026 (net income, diluted shares, EPS) · Q2 2025 (the same quarter a year earlier)
E02 Low P/E at a cyclical peak = undervalued Not triggered confidence medium
Net income of $62M is not at a cyclical high against the last eight years (median $54M, best $74M): the P/E of 91.1× is on a normal year.
The figures and how they are read
| market value | $5.6B |
| net income ttm | $62M |
| pe ttm | 91.10 |
| net income median fy | $54M |
| pe mid cycle | 104.50 |
| net income peak fy | $74M |
| years | FY2018 / 49.0; FY2019 / 41.0; FY2020 / 45.0; FY2021 / 50.0; FY2022 / 74.0; FY2023 / 73.0; FY2024 / 64.0; FY2025 / 54.0 |
| down years in window | 4 |
P/E on the trailing twelve months' net income against the P/E on the median net income of the last eight fiscal years (a mid-cycle stand-in); 'at a peak' = this year's profit at or above 90% of the best year and at least 1.3× the median
Source: Q2 2026 (net income, trailing twelve months)
E07 A precise DCF value = the true value To review confidence high
The DCF's point value is 34.65 a share (price 136.66); 49% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from 28.31 to 41.00; across every method the research ran the range is -24 to 2,518. The value is a range; the decimals are not information.
The figures and how they are read
| dcf value | 34.65 |
| price | 136.66 |
| terminal value share | +49.2% |
| swing by input | Operating margin / ±3 pts / 28.31 / 41.0; Revenue growth (each year) / ±5 pts / 31.2 / 38.72; WACC / ±1 pt / 32.83 / 36.89; Tax rate / ±5 pts / 33.47 / 35.83 |
| range all methods | -24.37; 2518.0 |
the DCF's point value against the share of it that is the terminal value and the value at each input moved by one step (growth ±5 pts, WACC ±1 pt, margin ±3 pts …); the range across every method the research ran
Source: 2026-11-08 (valuation research)
What would explain it innocently
- A stable, mature business with a narrow range of outcomes, where the point value is a fair summary
- The inputs that matter most are themselves well known (a regulated return, a long contract)
What to look for in the filing
- Which input you believe differs from the research's and why
- What the price implies for growth (the reverse DCF on the fair-value page)
What would show the trap does not apply
- The DCF's value is robust to the terminal growth and discount rate (the range's low end is still above the price)
- The company's cash flows over the next three years track the DCF's early years
Look again: next filing.
J06 A bank's low P/E and high profit = safe Not applicable
not a bank
J08 A REIT's low net income = the dividend is unsafe Not applicable
not a REIT
What the statuses mean
Triggered: the filings show the pattern; read the normal explanations and the missing evidence before concluding anything. To review: one quarter or a weak signal; a reader's judgement, not a pattern. Not triggered: the pattern is absent on these figures. Insufficient data: the filings read so far do not hold what the rule needs; this is not a clean bill. Not applicable: the rule is not meant for this kind of company (a bank's working capital, a loss-making quarter's EPS growth). Out of date: the latest filing is more than fifteen months old.
Severity is what the pattern could mean for cash, value or solvency; confidence is how reliable the inputs and the reading are. The two are kept apart.
Record a view
A reader's judgement, grounds, what would change it and the next review; kept in the browser (needs JavaScript).
Every rule and the companies it triggers on → Novanta: cash flow → Earnings quality score →
Each rule reads the company's own filings by a fixed formula and says what would explain the same figures innocently. A triggered rule is a question to verify, not a finding of manipulation, and not a view on the stock. Missing data is shown as missing, never as clear. Not investment advice.