Novanta Inc.
Information Technology · Electronic Equipment, Instruments & Components
Structural: $NOVT is a sub-component OEM supplier whose lasers, encoders, and vision modules are designed-in to multi-year medical and semicap platforms, producing sticky high-gross-margin (~45%) recurring revenue with switching cost = customer requalification.
End-market mix (medical ~50%, microelectronics ~25%, industrial ~25%) gives diversified exposure to robotics, semicap, surgical robotics, and DNA sequencing.
- Surgical-robotics ramp ($ISRG, Medtronic Hugo) consumes Novanta optical encoders + scanning modules per console + per instrument
- Semicap recovery (wafer inspection, advanced packaging) reactivates microelectronics segment with $AMAT $LRCX $KLAC tie-in
- DNA sequencing refresh cycle ($ILMN NovaSeq X, Element, Ultima) uses Novanta photonics inside the optical train
- M&A engine - 15+ tuck-ins since 2016 - compounds revenue at high single digits without diluting margin
- ROIC mid-teens, FCF conversion >90% of net income
- ~25% of revenue concentrated in top-10 customers; single design-loss = multi-quarter air pocket
- Microelectronics segment correlates 1:1 with $AMAT/$LRCX bookings; cyclical reset 2024-2025 already hit
- Acquisition cadence requires premium multiples; goodwill ~50% of total assets
- Forward P/E ~30x leaves little cushion if medical capex slows
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