It might be of some concern to shareholders to see the Novanta Inc. (NASDAQ:NOVT) share price down 11% in the last month. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 216% higher today. To some, the recent pullback wouldn't be surprising after such a fast rise. Of course, that doesn't necessarily mean it's cheap now.

Since it's been a strong week for Novanta shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for Novanta

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over half a decade, Novanta managed to grow its earnings per share at 2.4% a year. This EPS growth is slower than the share price growth of 26% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 75.47.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Novanta has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

A Different Perspective

Although it hurts that Novanta returned a loss of 11% in the last twelve months, the broader market was actually worse, returning a loss of 14%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 26% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Novanta you should be aware of.

Of course Novanta may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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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.