TipRanks Smart Growth Portfolio #4: Scaling the Invisible
1
Dear Investors,
Welcome to the 4th edition of the Smart Growth Portfolio and Newsletter.
1
1
Portfolio News and Updates
❖ Citi named monday.com (MNDY) its top pick in back office software, citing the company’s stability and incremental upside drivers.
❖ Clear Secure (YOU) is extending its partnership with American Express for a second one-year renewal term. The partnership, in place since 2019, provides eligible American Express Card Members who enroll in Clear up to $199 in annual statement credits for their Clear Plus Membership.
In other company news, CLEAR added five new TSA PreCheck enrollment sites, expanding to 58 locations nationwide with more launches planned through 2025.
❖ Roth MKM said it has “near-term high conviction” in shares of PowerFleet (AIOT), as underlying demand “continues to be healthy” despite macro uncertainty.
❖ ❖ ❖ We are happy to announce the addition of Clearwater Analytics (CWAN) – which was recommended in our previous Newsletter – to the Smart Growth Portfolio.
Clearwater Analytics is a fintech SaaS company streamlining investment accounting, reporting, and analytics for institutional clients. Through cloud-native automation and AI-driven insights, it delivers scalable, real-time financial solutions, setting itself apart in a competitive landscape. Strategic acquisitions have expanded its capabilities, positioning it as the only fully integrated front-to-back provider for investment firms.
Clearwater is a fundamentally strong company with robust revenue growth, improving margins, and increasing institutional adoption. Analysts remain bullish, citing its expanding market share and continued product innovation. With a disciplined approach to growth and a long-term vision, Clearwater is well-positioned to solidify its leadership in investment technology while capitalizing on rising demand for automation in financial services.
1
This Week’s Top Growth Pick: Nova (NVMI)
Nova Ltd. is a semiconductor metrology company delivering advanced measurement and process control solutions for chip manufacturers. Its systems analyze critical dimensions and material properties during fabrication, enabling higher yield and precision at leading-edge nodes. Nova’s portfolio supports logic, memory, and advanced packaging technologies, using AI-driven modeling and hybrid metrology to optimize manufacturing. The company plays a pivotal role in enabling 3D structures and next-gen architectures across global fabs. With a strong focus on innovation, Nova helps semiconductor makers navigate increasing complexity, reduce variability, and accelerate time to yield. Its solutions are integral to scaling Moore’s Law and ensuring process integrity in the era of nanoscale and heterogeneous integration.
1
Calibrated Growth
Founded in 1993, Nova started as a metrology tools provider for semiconductor fabs, focusing on surface measurement and critical dimension analysis. Early success came from aligning tightly with leading foundries during the 90s and early 2000s, as fabs began demanding higher process control to scale advanced nodes. By doubling down on proprietary x-ray and optical metrology and investing in AI-based modeling, Nova carved out a niche in complex material and structure analysis – a field largely overlooked by legacy inspection giants.
The shift to hybrid metrology in the 2010s marked a turning point. Nova’s integration of software analytics with precision hardware enabled it to win deeper, stickier engagements with the world’s leading chip foundries.
Between 2015 and 2020, Nova expanded its R&D footprint in Israel and Asia, tripled its addressable market, and launched new platforms that were widely adopted for 3D NAND and FinFET applications. The acquisition of Germany’s Ancosys in 2021 expanded its capabilities into chemical metrology – boosting its positioning in advanced packaging.
Between 2020 and 2023, it invested aggressively in U.S. operations – scaling its presence near key North American fabs and expanding R&D hubs to support Intel and other domestic manufacturers amid rising national security and supply chain concerns. Its focus on AI-driven process control software further differentiated it from traditional metrology players. These software-centric offerings added recurring revenue streams and boosted margins.
By 2023, Nova was firmly entrenched as a key enabler of cutting-edge chipmaking, benefiting from surging investments in AI infrastructure, 3D chip stacking, and heterogeneous integration. In 2024, Nova entered pilot programs with leading AI accelerator startups and advanced packaging consortiums – signaling a push beyond traditional foundry metrology into system-level analytics and chiplet integrity monitoring.
Nova is capitalizing on rising metrology demand driven by CoWoS adoption, 3D DRAM, and EUV-induced variability – while exploring software-only process control modules aimed at fabless customers. With deep ties to global fabs and deepened collaborations with U.S. fabs, Nova continues to grow by riding the capital intensity of semiconductor scaling – while simultaneously expanding into packaging, compound semis, and system-level analytics.
Source: Nova Ltd. Investor presentation, February 2025
1
Layer by Layer
Nova operates at the intersection of hardware, software, and data analytics – delivering advanced metrology and process control systems that enable semiconductor manufacturers to monitor and perfect each and every layer of the chip fabrication process. As chips become smaller, more 3D, and more power-dense, precise process control becomes increasingly mission-critical. Nova’s core proposition lies in its ability to measure what others can’t – using a combination of x-ray, optical, and AI-driven modeling to extract ultra-fine structural and material insights in real time.
Traditional inspection tools focus on visible defects. Nova goes deeper, analyzing the thickness, composition, and geometry of nanoscale layers without damaging the wafer. This non-destructive, high-precision approach allows chipmakers to catch yield-killing variances before they become costly. Its hybrid metrology systems integrate hardware with powerful analytics software, helping fabs accelerate ramp-up, reduce scrap, and optimize performance at cutting-edge nodes like 3nm and below.
Nova’s competitive edge stems from its deep collaboration with industry leaders. It is embedded in the process development cycles of TSMC, Samsung, and Intel, giving it first-mover advantage as new architectures like GAA, 3D NAND, and chiplets emerge. Its platforms – including Nova VERAFLEX, METRION, i500, and ELIPSON – are used across both foundry and memory fabs, supporting a diverse set of production flows. Nova also works with advanced packaging partners and AI accelerator firms, broadening its influence as the industry shifts toward heterogeneous integration.
The company’s total addressable market (TAM) sits within the $9-10 billion process control market, with metrology representing a fast-growing $3+ billion segment. As semiconductor complexity increases, that metrology segment is projected to grow at 10-12% CAGR, outpacing overall wafer fab equipment (WFE) growth.
Nova is positioned to take a disproportionate share of that upside, especially as it expands into chemical metrology, system-level analytics, and software-only modules for fabless design houses. With strong IP, customer stickiness, and high switching costs, Nova isn’t just defending its niche – it’s scaling it, layer by layer.
Source: Nova Ltd. Investor presentation, February 2025
1
Profitable by Design
Nova operates a high-margin, capital-efficient model centered on the sale of precision metrology tools, process control software, and related services to global semiconductor manufacturers. Roughly 80% of revenue comes from product sales, while 20% is services, including recurring software support, upgrades, and fleet analytics – a value-added layer that enables customers to monitor, optimize, and predictively maintain their installed Nova systems across multiple fabs. This not only improves uptime and yield but also deepens Nova’s integration into daily fab operations.
Over the past five years, Nova’s revenue CAGR has been 26%, with non-GAAP EPS CAGR of over 36%. In 2024, Nova delivered record results: a record $672.4 million in revenue, up 30% year-over-year, with non-GAAP net income of $214.9 million and diluted EPS of $6.96, up 38% from 2023.
Gross margin expanded to 58.5% in 2024, while non-GAAP operating margin hit 33%, showcasing solid leverage on a rising scale. Nova combines high gross margins with exceptional return on invested capital (ROIC), making it one of the most capital-efficient growth stories in semiconductor equipment. Its ability to scale profitably without excessive capital intensity is a major differentiator in an otherwise asset-heavy industry.
Looking forward, the company’s management reaffirmed its commitment to outpace the mid-single-digit growth forecasted for the WFE market in 2025, supported by advanced logic and packaging demand and AI-related market expansion. In Q1 2025, Nova anticipates it will achieve gross margins of 59%, despite a projected increase in operating expenses. Revenue is expected to come in the range of $200-215 million, up from Q4 top line of $194.77 million. Meanwhile, diluted non-GAAP EPS is projected at $2.00-2.16, versus $1.94 in Q4 2024.
Source: Nova Ltd. Investor presentation, February 2025
1
Engineered Resilience
Beneath Nova’s profitability lies a business designed to weather volatility without compromising on growth. The company has a clean balance sheet with $820 million in gross cash reserves and no short-term liquidity risk – meaning it has no need to raise capital, even if macro conditions tighten or customer capex slows temporarily. Nova generated $218 million in free cash flow in 2024.
Nova reinvests heavily in innovation, allocating ~16% of annual revenue to R&D. In 2024, this totaled $110 million, funding advances in chemical metrology, AI-based analytics, and next-gen measurement platforms like Metrion and Veraflex. The company’s active installed base now exceeds 6,400 systems across 400 customer sites, creating a wide moat and a sticky upgrade cycle.
While Nova enjoys deep, long-standing partnerships with giants like TSMC, Samsung, and Intel, this does raise customer concentration and geographic risk. In 2024, 77% of Nova’s revenue came from Asia, with China accounting for 39%, Taiwan 20%, and South Korea 18%. The U.S. contributed just 14%, though this percent share is expected to grow. Nova has acknowledged the China risk and anticipates a decline in exposure to that market as soon as 2025, as growth increasingly shifts toward advanced nodes and packaging platforms concentrated outside of China.
Notably, Nova’s metrology tools have not been targeted by U.S. export controls to date, as they fall outside the categories of EUV lithography or high-end compute restrictions – a key distinction that helped sustain Chinese sales despite the escalating trade tensions. Importantly, key customers – TSMC and Samsung – are not only the world’s most advanced fabs, but also actively expanding in the U.S., which should further mitigate regional concentration concerns going forward.
To diversify further, Nova has been expanding its U.S. presence, acquiring Sentronics in 2024 to enhance its dimensional metrology portfolio, and ramping up collaborations with advanced packaging and AI hardware players. These include engagements with chiplet integrators, high-bandwidth memory designers, and U.S.-based AI startups working on custom accelerators – all of which require tighter process control at the packaging and interconnect level, where Nova’s hybrid and chemical metrology platforms offer a unique advantage.
In short, Nova combines disciplined financial execution with structural growth tailwinds in semiconductor complexity. Its exposure to geopolitical volatility is real though strategically hedged – and outweighed by its embedded role in the world’s most advanced chipmaking ecosystems.
Source: Nova Ltd. Investor presentation, February 2025
1
Priced for Precision
Nova’s stock trajectory has been volatile — a common trait in high-growth technology names. Over the past 12 months, the stock has gained approximately 12%, outperforming both the Nasdaq Composite and all major peers in the Semiconductor Materials & Equipment space, including large, established players and small-cap growth firms alike.
Despite that outperformance, NVMI still trades at attractive forward multiples, both on a GAAP and non-GAAP basis. While it carries a slight premium to the peer average, that’s justified by superior projected revenue, EBITDA, and net income growth, as well as higher margins, return on equity (ROE), and return on assets (ROA). Nova’s financial profile not only exceeds that of most small-cap peers but also rivals industry giants like KLA Corporation and Applied Materials.
Given that setup, it’s no surprise that Wall Street sentiment remains highly bullish. According to TipRanks’ top-rated analysts, NVMI is rated a “Strong Buy,” with a 12-month average price target implying over 53% upside. Notably, Evercore ISI and Cantor Fitzgerald raised their targets in the past month, citing strong fundamentals, expanding market opportunity, and continued potential for earnings outperformance.
1
To Sum It All Up
Nova Ltd. is a high-margin semiconductor equipment company that helps chipmakers manufacture more advanced, efficient, and reliable semiconductors through precision measurement and process control. Its technology is essential for enabling cutting-edge chip designs, including three-dimensional structures and next-generation packaging. Nova is deeply integrated into the operations of industry leaders like TSMC, Samsung, and Intel, giving it strong positioning across global fabrication ecosystems. The company combines disciplined financial management with continuous innovation, generating robust cash flow and expanding profitability. With strong industry demand and analyst conviction, Nova stands out as a capital-efficient, growth compounder in semiconductor complexity.
1
1
Smart Growth Portfolio
|
1
1
Click here for more stock analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
1
Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
