What Are the Fundamentals of Nordson (NDSN)?

Nordson logged a 5.67% change during today's afternoon session, and is now trading at a price of $211.91 per share.

Nordson shares moved -5.8% over the last 52 weeks, with a high of $250.59 and a low of $193.32. During this time, the stock basically tracked the performance of the S&P 500. As of January 2022, the company's 50-day average price is $239.0.

Nordson Corporation designs, manufactures, and markets products and systems for dispensing, applying, and controlling adhesives, coatings, polymers, sealants, biomaterials, and other fluids globally. The large-cap Technology company is based in Westlake, OH. Nordson has returned a 1.23% dividend yield over the last 12 months.

The Company Has a Steady Stream of Strong Cash Flows:

2019-10-31 2020-10-31 2021-10-31 2022-10-31
Revenue (MM) $2,146 $2,088 $2,336 $2,568
Revenue Growth n/a -2.69% 11.86% 9.94%
Gross Margins 55.55% 54.13% 22.75% 24.27%
Gross Margins Growth n/a -2.56% -57.97% 6.68%
Operating Margins 22.51% 16.74% 26.33% 27.35%
Operating Margins Growth n/a -25.63% 57.29% 3.87%
Earnings Per Share $5.85 $4.3 $7.81 $8.98
EPS Growth n/a -26.5% 81.63% 14.98%
Free Cash Flow (MM) $319 $452 $508 $462
FCF Growth n/a 41.81% 12.33% -9.05%
Capital Expenditures (MM) $64 $51 $38 $51
Net Debt / EBITDA 2.38 2.41 0.87 1.33

The Market Is Giving a Fair Value to Nordson:

Compared to the Technology sector's average of 27.16, Nordson has a trailing twelve month P/E ratio of 24.73 and, according to its EPS guidance of 8.88, an expected P/E ratio of 23.87. The company doesn't issue forward earnings guidance, and the mean growth rate of its last 5 years of reported EPS is 15.25%. On this basis, the company's PEG ratio is 1.62. But we cannot assume that Nordson's impressive past EPS growth rate is sustainable. It is more prudent to calculate the company's PEG ratio with the expected 5-year EPS growth rate of the entire market, which is 13.05%. This more cautious approach gives us a PEG ratio of 1.9, which suggests that the company's shares are overvalued.

However, Nordson is likely undervalued in terms of its equity because its P/B ratio is 6.14 compared to its sector average of 6.23. The company's shares are currently trading 160% above their fair value as expressed by Benjamin Graham's formula:

√(22.5 * 5-year average EPS * book value per share) = √(22.5 * 6.69 * 42.8) = $80.26

Despite the company's relatively high multiples, we believe that its strong cash flows and low debt levels suggest the market is giving it a fair value.

Analyst Sentiment Is Positive on Nordson:

5 analysts are following Nordson and on average, they have given the company a rating of buy. At the current price of $211.91, NDSN is trading well below its average analyst target price of $265.8 per share, implying an analyst consensus of some upside potential for the stock.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.