Nordson (NDSN)

Manufacturing company Nordson (NASDAQ:NDSN) announced better-than-expected revenue in Q4 CY2025, with sales up 8.8% year on year to $669.5 million. Guidance for next quarter’s revenue was better than expected at $725 million at the midpoint, 1.8% above analysts’ estimates. Its non-GAAP profit of $2.37 per share was in line with analysts’ consensus estimates.

Company Overview

Founded in 1954, Nordson Corporation (NASDAQ:NDSN) manufactures dispensing equipment and industrial adhesives, sealants and coatings.

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).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, Nordson’s sales grew at a tepid 5.7% compounded annual growth rate over the last five years. 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 performance shows its demand has slowed as its annualized revenue growth of 3.6% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs.

We can dig further into the company’s sales dynamics by analyzing its 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 1.5% year-on-year declines. Because this number is lower than its two-year revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.

This quarter, Nordson reported year-on-year revenue growth of 8.8%, and its $669.5 million of revenue exceeded Wall Street’s estimates by 2.6%. Company management is currently guiding for a 6.2% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 3.2% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and implies its newer products and services will not accelerate its top-line performance yet.

Cost of sales for an industrials business is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics.

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 55.2% gross margin over the last five years. That means Nordson only paid its suppliers $44.76 for every $100 in revenue.

Nordson’s gross profit margin came in at 54.7% this quarter, 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.

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 26%. 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 decreased by 1.2 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, Nordson generated an operating margin profit margin of 24.9%, up 2 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

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 remarkable 12.3% compounded annual growth rate over the last five years, higher than its 5.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Nordson’s quality of earnings can give us a better understanding of its performance. A five-year view shows that Nordson has repurchased its stock, shrinking its share count by 4.5%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Nordson, its two-year annual EPS growth of 6.6% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, Nordson reported adjusted EPS of $2.37, up from $2.06 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 $10.55 to grow 8.6%.

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 20.6% over the last five years.

Taking a step back, we can see that Nordson’s margin expanded by 3.2 percentage points during that time. This shows the company is heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

Nordson’s free cash flow clocked in at $122.9 million in Q4, equivalent to a 18.4% margin. The company’s cash profitability regressed as it was 4 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

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, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 16%, 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. 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.

Nordson reported $120.4 million of cash and $2.00 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 $914.4 million of EBITDA over the last 12 months, we view Nordson’s 2.1× net-debt-to-EBITDA ratio as safe. We also see its $98.23 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.

We enjoyed seeing Nordson beat analysts’ revenue expectations this quarter. We were also glad its EPS guidance for next quarter exceeded Wall Street’s estimates. On the other hand, its organic revenue missed and its EBITDA fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded up 1.5% to $303.64 immediately after reporting.

Updated: February 18, 2026 at 10:25 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

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 analysts expect its demand to deteriorate over the next 12 months. While its admirable gross margins indicate the mission-critical nature of its offerings, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its organic revenue declined.

Nordson’s P/E ratio based on the next 12 months is 25.8x. Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $275.82 on the company (compared to the current share price of $299.50), implying they don’t see much short-term potential in Nordson.