Nordson trades at $308.33 per share and has stayed right on track with the overall market, gaining 14.7% over the last six months. At the same time, the S&P 500 has returned 14.2%.
Is now the time to buy Nordson, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Nordson Not Exciting?
We’re sitting this one out for now. Here are three reasons why there are better opportunities than NDSN, plus one stock we’d rather own.
1. Slow Organic Growth Suggests Waning Demand In Core Business
We can better understand Professional Tools and Equipment companies by analyzing their organic revenue. This metric gives visibility into Nordson’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Nordson’s organic revenue averaged 1.4% year-on-year growth. This performance was underwhelming and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations. 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Nordson’s revenue to rise by 6.4%, close to its 5.1% annualized growth for the past five years. This projection doesn’t excite us and indicates its newer products and services will not lead to better top-line performance yet.
3. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
Unfortunately, Nordson’s ROIC has decreased over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
Nordson’s business quality ultimately falls short of our standards. That said, the stock currently trades at 25× forward P/E (or $308.33 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We’re fairly confident there are better stocks to buy right now. Let us point you toward a safe-and-steady industrials business benefiting from an upgrade cycle.
Stocks We Like More Than Nordson
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