Over the past six months, Nordson’s shares (currently trading at $211.27) have posted a disappointing 7.2% loss, well below the S&P 500’s 8.8% gain. This was partly due to its softer quarterly results and might have investors contemplating their next move.
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.Despite the more favorable entry price, we're cautious about Nordson. Here are three reasons why NDSN doesn't excite us and a stock we'd rather own.
Why Is Nordson Not Exciting?
Founded in 1954, Nordson Corporation (NASDAQ:NDSN) manufactures dispensing equipment and industrial adhesives, sealants and coatings.
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Unfortunately, Nordson’s 4.2% annualized revenue growth over the last five years was sluggish. This fell short of our benchmark for the industrials sector. 
2. Core Business Falling Behind as Demand Declines
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 1.9% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Nordson might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). 
3. EPS Growth Has Stalled Over the Last Two Years
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Nordson’s flat EPS over the last two years was worse than its 1.9% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
Nordson’s business quality ultimately falls short of our standards. Following the recent decline, the stock trades at 20.4× forward price-to-earnings (or $211.27 per share). At this valuation, there’s a lot of good news priced in - we think there are better opportunities elsewhere. We’d suggest looking at Meta, a top digital advertising platform riding the creator economy.
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