At the current price of $262, what are market expectations regarding Nordson’s future operating performance? Over the next 6 years, Nordson shares will need to reach $439 to achieve average annual stock market performance of 9.0%. To achieve Upper quartile performance, Nordson’s stock price will need to reach $517 by 2029.
Executive Summary
- Key Nordson characteristics: above average financial strength, above average expected growth, average profitability, and instability. A big positive influence on Nordson’s valuation is its superior Risk Profile.
- Average valuation, below market shareholder returns. Current valuation levels are average relative to the Nordson Peer Group. Recent market returns have underperformed the Nordson Peer Group. Total shareholder returns expected to significantly lag the overall equity market. Based on current investor expectations, Nordson shares should reach a level of $217 by 2029 — an -1.7% per year total shareholder return. A 2029 stock price of $439 would reflect median performance and a price of $517 would be required to reach upper quartile performance.
- Nordson’s historical growth is modestly above average. Historical growth has been high relative to the Nordson Peer Group and forecasted growth is relatively average. EPS Growth has been superior. Revenue Growth has lagged. Nordson’s historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity. Nordson’s consensus growth expectations are lower than historical growth.
- Pretax Margin is group leading. Asset Turnover is group lagging. The company has normal cash needs.
- Risk Profile has been Nordson’s biggest valuation strength. Nordson’s risk profile is favorable. Overall variability has been relatively low with relatively low revenue variability, only average E.P.S. variability, Financial Strength is relatively high and earnings’ expectations are relatively very high. The debt/capital ratio has declined.
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