Novanta Inc (NOVT)

Short-term

Turnover ratios

Novanta Inc's activity ratios provide insights into its efficiency in managing inventory, receivables, payables, and working capital.

1. Inventory Turnover:
- The inventory turnover ratio indicates how many times a company sells and replaces its inventory within a specific period.
- Novanta's inventory turnover has been somewhat fluctuating over the years, starting at 5.39 in 2020, decreasing to 4.16 in 2022, before slightly increasing to 5.34 in 2024.
- A higher inventory turnover ratio generally reflects better inventory management and indicates that Novanta is efficiently selling its inventory.

2. Receivables Turnover:
- The receivables turnover ratio measures how efficiently a company collects its accounts receivable during a period.
- Novanta's receivables turnover has shown a decreasing trend from 7.84 in 2020 to 6.29 in 2024, indicating a slightly slower collection of receivables over the years.
- A lower receivables turnover ratio may suggest potential issues with customer credit or collection policies that Novanta may need to address.

3. Payables Turnover:
- The payables turnover ratio evaluates how efficiently a company pays its suppliers.
- Novanta's payables turnover decreased from 11.63 in 2020 to 10.05 in 2024, with fluctuations in between.
- A lower payables turnover ratio may indicate potential liquidity issues or changes in payment terms with suppliers.

4. Working Capital Turnover:
- The working capital turnover ratio assesses how effectively a company utilizes its working capital to generate sales.
- Novanta's working capital turnover has shown fluctuations over the years, ranging from 3.10 in 2020 to 3.57 in 2024.
- A higher working capital turnover ratio indicates better utilization of working capital to drive sales growth.

Overall, while Novanta's activity ratios reflect varying degrees of efficiency in managing inventory, receivables, payables, and working capital over the years, further analysis and comparison with industry benchmarks would provide a more comprehensive assessment of the company's operational performance.

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Average number of days

Novanta Inc's activity ratios indicate the efficiency of the company in managing its inventory, receivables, and payables.

1. Days of Inventory on Hand (DOH): The DOH measures the average number of days it takes for Novanta Inc to sell its inventory. The trend shows an increasing pattern from 67.73 days in 2020 to 76.99 days in 2023, indicating a slower turnover of inventory. However, there was a slight decrease to 68.29 days in 2024, which could imply a more efficient inventory management in that year.

2. Days of Sales Outstanding (DSO): The DSO ratio reflects the average number of days Novanta Inc takes to collect payments from its customers. There was a notable increase in DSO from 46.58 days in 2020 to 59.85 days in 2021, followed by a more stable range around 58-59 days in the subsequent years. This suggests a consistent collection period over the years.

3. Number of Days of Payables: This metric represents the average number of days Novanta Inc takes to pay its suppliers. The trend shows some fluctuation, with an increase from 31.38 days in 2020 to 41.75 days in 2021, followed by a decrease to 29.48 days in 2023 and another rise to 36.31 days in 2024. This indicates varying payment terms with suppliers.

Overall, Novanta Inc should focus on optimizing its inventory turnover to reduce the DOH metric and continue to manage its receivables and payables efficiently to support cash flow management and overall liquidity.

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Long-term

The fixed asset turnover ratio for Novanta Inc has been improving steadily over the five-year period, increasing from 7.48 in 2020 to 8.39 in 2024. This indicates that the company is generating more revenue relative to its investment in fixed assets over time.

On the other hand, the total asset turnover ratio fluctuated during the period, with a decrease in 2021 followed by an increase in 2022 and 2023, and then a slight decline in 2024. Overall, the company's efficiency in generating sales from its total assets remained relatively stable, with a moderate increase from 0.68 in 2020 to 0.72 in 2023.

In conclusion, Novanta Inc has shown an improving trend in utilizing its fixed assets efficiently to generate revenue, while its overall asset turnover performance has been relatively consistent with some fluctuations over the five-year period.