Nordson (NDSN)
We’re skeptical of Nordson. Its poor sales growth and falling returns on capital suggest its growth opportunities are shrinking.― StockStory Analyst Team
1. News
2. Summary
Why We Think Nordson Will Underperform
Founded in 1954, Nordson Corporation (NASDAQ:NDSN) manufactures dispensing equipment and industrial adhesives, sealants and coatings.
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Muted 4% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
- A positive is that its offerings are difficult to replicate at scale and lead to a best-in-class gross margin of 54.9%
Nordson falls below our quality standards. We’re on the lookout for more interesting opportunities.
Why There Are Better Opportunities Than Nordson
High Quality
Investable
Underperform
Why There Are Better Opportunities Than Nordson
Nordson is trading at $192.84 per share, or 18.8x forward P/E. This multiple is lower than most industrials companies, but for good reason.
Cheap stocks can look like a great deal at first glance, but they can be value traps. They often have less earnings power, meaning there is more reliance on a re-rating to generate good returns - an unlikely scenario for low-quality companies.
3. Nordson (NDSN) Research Report: Q4 CY2024 Update
Manufacturing company Nordson (NASDAQ:NDSN) fell short of the market’s revenue expectations in Q4 CY2024, with sales falling 2.8% year on year to $615.4 million. Next quarter’s revenue guidance of $670 million underwhelmed, coming in 2.5% below analysts’ estimates. Its non-GAAP profit of $2.06 per share was 0.9% below analysts’ consensus estimates.
Nordson (NDSN) Q4 CY2024 Highlights:
- Revenue: $615.4 million vs analyst estimates of $638.3 million (2.8% year-on-year decline, 3.6% miss)
- Adjusted EPS: $2.06 vs analyst expectations of $2.08 (0.9% miss)
- Adjusted EBITDA: $188.1 million vs analyst estimates of $194.4 million (30.6% margin, 3.2% miss)
- Revenue Guidance for Q1 CY2025 is $670 million at the midpoint, below analyst estimates of $687.5 million
- Adjusted EPS guidance for Q1 CY2025 is $2.40 at the midpoint, below analyst estimates of $2.42
- Operating Margin: 22.9%, down from 25.2% in the same quarter last year
- Free Cash Flow Margin: 22.4%, down from 26% in the same quarter last year
- Backlog: $670 million at quarter end
- Organic Revenue fell 9.4% year on year (-2.2% in the same quarter last year)
- Market Capitalization: $12.24 billion
Company Overview
Founded in 1954, Nordson Corporation (NASDAQ:NDSN) manufactures dispensing equipment and industrial adhesives, sealants and coatings.
Nordson Corporation was established by brothers Eric and Evan Nord, evolving from the U.S. Automatic Company, which began in 1909. Initially focusing on screw machine parts for the automotive industry, the company shifted to producing high-precision parts during World War II. Post-war, the brothers sought a proprietary product, finding it in the "hot airless" method of spraying paint, leading to the creation of Nordson as a division of U.S. Automatic Corporation.
In 1966, U.S. Automatic merged into Nordson Corporation, continuing its development of spray painting and powder coating technologies. In 1986, Nordson acquired companies such as Industriell Coating Aktiebolag and Meltex, enhancing its adhesive dispensing capabilities. The company expanded into high technology and electronics industries in the late 1990s, acquiring firms such as Asymtek and EFD, which are integral to Nordson’s Advanced Technology segment today. In the 2010s, Nordson strengthened its position in precision technology and entered the medical, test and inspection, and polymer processing areas through acquisitions, including Micromedics and Value Plastics.
Today, Nordson Corporation produces a variety of advanced products and systems that serve diverse industries. Its offerings range from precision dispensing equipment and coating systems for the electronics and packaging sectors to medical devices such as catheters and medical tubing for the healthcare industry. The company generates revenue from the sale of these products, as well as from contracts for related software, maintenance services, and aftermarket parts, which generate a source of recurring revenue.
The company continues an acquisition strategy of selectively focusing on companies that offer strong operational value and enhance its product. For instance, in August 2023, Nordson acquired the ARAG Group, a leader in precision control systems and smart fluid components for agricultural spraying. This strategic acquisition aligns with Nordson’s objective to enhance its offerings in precision technology and expand its presence in the growing agriculture market.
4. Professional Tools and Equipment
Automation that increases efficiency and connected equipment that collects analyzable data have been trending, creating new demand. Some professional tools and equipment companies also provide software to accompany measurement or automated machinery, adding a stream of recurring revenues to their businesses. On the other hand, professional tools and equipment companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.
Competitors offering similar products include Graco (NYSE:GGG), Illinois Tool Works (NYSE:ITW), and Sono-Tek (OTCMKTS: SOTK).
5. Sales Growth
A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Nordson grew its sales at a sluggish 4% compounded annual growth rate. This was below our standard for the industrials sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Nordson’s recent history shows its demand slowed as its annualized revenue growth of 1.5% over the last two years is below its five-year trend.
Nordson also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Nordson’s organic revenue averaged 3.2% year-on-year declines. Because this number is lower than its normal revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.
This quarter, Nordson missed Wall Street’s estimates and reported a rather uninspiring 2.8% year-on-year revenue decline, generating $615.4 million of revenue. Company management is currently guiding for a 3% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 6.5% over the next 12 months. Although this projection suggests its newer products and services will fuel better top-line performance, it is still below the sector average.
6. Gross Margin & Pricing Power
Nordson has best-in-class unit economics for an industrials company, enabling it to invest in areas such as research and development. Its margin also signals it sells differentiated products, not commodities. As you can see below, it averaged an elite 54.9% gross margin over the last five years. That means Nordson only paid its suppliers $45.13 for every $100 in revenue.
Nordson produced a 54.6% gross profit margin in Q4, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.
7. Operating Margin
Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.
Nordson has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 24.6%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
Looking at the trend in its profitability, Nordson’s operating margin rose by 6.7 percentage points over the last five years, showing its efficiency has meaningfully improved.

This quarter, Nordson generated an operating profit margin of 22.9%, down 2.3 percentage points year on year. Since Nordson’s operating margin decreased more than its gross margin, we can assume it was recently less efficient because expenses such as marketing, R&D, and administrative overhead increased.
8. Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Nordson’s EPS grew at a decent 9.9% compounded annual growth rate over the last five years, higher than its 4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Nordson’s earnings can give us a better understanding of its performance. As we mentioned earlier, Nordson’s operating margin declined this quarter but expanded by 6.7 percentage points over the last five years. Its share count also shrank by 1.8%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For Nordson, EPS didn’t budge over the last two years, a regression from its five-year trend. We hope it can revert to earnings growth in the coming years.
In Q4, Nordson reported EPS at $2.06, up from $2.02 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Nordson’s full-year EPS of $9.35 to grow 9.7%.
9. Cash Is King
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Nordson has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 20.3% over the last five years.
Taking a step back, we can see that Nordson’s margin dropped by 5.6 percentage points during that time. If its declines continue, it could signal higher capital intensity.

Nordson’s free cash flow clocked in at $137.7 million in Q4, equivalent to a 22.4% margin. The company’s cash profitability regressed as it was 3.7 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends carry greater meaning.
10. Return on Invested Capital (ROIC)
EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Although Nordson hasn’t been the highest-quality company lately because of its poor top-line performance, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 15.7%, impressive for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Nordson’s ROIC averaged 1.7 percentage point decreases each year. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
11. Balance Sheet Assessment
Nordson reported $130.4 million of cash and $2.19 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $840.7 million of EBITDA over the last 12 months, we view Nordson’s 2.4× net-debt-to-EBITDA ratio as safe. We also see its $89.23 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.
12. Key Takeaways from Nordson’s Q4 Results
We struggled to find many positives in these results as the company missed on all key metrics. It also shared revenue and EPS guidance for next quarter that fell short of Wall Street's estimates. Overall, this was a weaker quarter. The stock remained flat at $216.80 immediately following the results.
13. Is Now The Time To Buy Nordson?
Updated: May 4, 2025 at 11:09 PM EDT
The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Nordson.
Nordson isn’t a terrible business, but it doesn’t pass our bar. To kick things off, its revenue growth was uninspiring over the last five years. And while its admirable gross margins indicate the mission-critical nature of its offerings, the downside is its cash profitability fell over the last five years. On top of that, its organic revenue declined.
Nordson’s P/E ratio based on the next 12 months is 18.8x. This valuation tells us a lot of optimism is priced in - we think there are better opportunities elsewhere.
Wall Street analysts have a consensus one-year price target of $243.29 on the company (compared to the current share price of $192.84).
Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.
Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.
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