3 Reasons NDSN is Risky and 1 Stock to Buy Instead

Since December 2024, Nordson has been in a holding pattern, posting a small return of 1.7% while floating around $214.91.

Is there a buying opportunity in Nordson, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Do We Think Nordson Will Underperform?

We're sitting this one out for now. Here are three reasons why you should be careful with NDSN and a stock we'd rather own.

1. Core Business Falling Behind as Demand Declines

In addition to reported revenue, organic revenue is a useful data point for analyzing Professional Tools and Equipment companies. 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 3.7% 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).

2. 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.

3. Free Cash Flow Margin Dropping

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

As you can see below, Nordson’s margin dropped by 5.1 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. Nordson’s free cash flow margin for the trailing 12 months was 17%.

Final Judgment

Nordson falls short of our quality standards. That said, the stock currently trades at 20.7× forward P/E (or $214.91 per share). At this valuation, there’s a lot of good news priced in - you can find more timely opportunities elsewhere. We’d suggest looking at the most dominant software business in the world.

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