Nova (NASDAQ:NVMI) Posts Better-Than-Expected Sales In Q4, Next Quarter Sales Guidance Is Optimistic

Radek Strnad /
2023/02/15 8:05 am EST

Semiconductor quality control company Nova (NASDAQ: NVMI) reported Q4 FY2022 results topping analyst expectations, with revenue up 24.5% year on year to $151.2 million. Guidance for next quarter's revenue was $130 million at the midpoint, 3.99% above the average of analyst estimates. Nova made a GAAP profit of $36.1 million, improving on its profit of $22.2 million, in the same quarter last year.

Is now the time to buy Nova ? Access our full analysis of the earnings results here, it's free.

Nova (NVMI) Q4 FY2022 Highlights:

  • Revenue: $151.2 million vs analyst estimates of $147.8 million (2.31% beat)
  • EPS (non-GAAP): $1.28 vs analyst estimates of $1.25 (2.04% beat)
  • Revenue guidance for Q1 2023 is $130 million at the midpoint, above analyst estimates of $125 million
  • Free cash flow of $41.2 million, up 52.3% from previous quarter
  • Inventory Days Outstanding: 157, down from 170 previous quarter
  • Gross Margin (GAAP): 55.4%, down from 56.2% same quarter last year

"The fourth quarter was a strong resolution to another record-breaking year for Nova, characterized by notable annual increase in revenue and profitability. Despite the volatility in the markets, the company was able to perform well during the fourth quarter, highlighting the strength of our diversified and agile business model," said Eitan Oppenhaim, President and CEO.

Headquartered in Israel, Nova (NASDAQ: NVMI) is a provider of quality control systems used in semiconductor manufacturing.

The semiconductor industry is driven by demand for advanced electronic products like smartphones, PCs, servers and data storage. The growth of data and technologies like artificial intelligence, 5G networks and smart cars are also creating a next wave of growth for the industry. To keep up with ever changing customer needs requires new tools that can design, fabricate and test at ever smaller sizes and more complex architectures, and that is driving the demand for semiconductor capital manufacturing equipment.

Sales Growth

Nova 's revenue growth over the last three years has been very strong, averaging 37.7% annually. And as you can see below, last year has been especially strong, with quarterly revenue growing from $121.5 million to $151.2 million. Semiconductors are a cyclical industry and long-term investors should be prepared for periods of high growth, followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

Nova  Total Revenue

This was a decent quarter for Nova as revenues grew 24.5%, topping analyst estimates by 2.31%. This was the third straight quarter of decelerating growth for Nova , potentially indicating a coming cycle downturn.

Nova 's revenue growth has decelerated for the last three quarters and the company expects growth to turn negative next quarter guiding to a 2.95% year on year decline, while analysts are estimating a NTM revenue decline of 18.5%.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) are an important metric for chipmakers, as it reflects the capital intensity of the business and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise the company may have to downsize production.

Nova  Inventory Days Outstanding

This quarter, Nova ’s inventory days came in at 157, 3 days below the five year average, showing no indication of an excessive inventory buildup at the moment.

Key Takeaways from Nova 's Q4 Results

With a market capitalization of $2.62 billion Nova is among smaller companies, but its more than $373.5 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We were very impressed by the strong improvements in Nova ’s inventory levels. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is flat on the results and currently trades at $91.2 per share.

Should you invest in Nova right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.