Understanding Nordson Corporation’s (NASDAQ:NDSN) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Nordson is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period.
Did NDSN beat its long-term earnings growth trend and its industry?
NDSN’s trailing twelve-month earnings (from 31 October 2018) of US$377m has jumped 28% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 11%, indicating the rate at which NDSN is growing has accelerated. What’s the driver of this growth? Let’s take a look at whether it is only because of industry tailwinds, or if Nordson has experienced some company-specific growth.
In terms of returns from investment, Nordson has invested its equity funds well leading to a 26% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 12% exceeds the US Machinery industry of 6.7%, indicating Nordson has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Nordson’s debt level, has increased over the past 3 years from 16% to 16%.
What does this mean?
Though Nordson’s past data is helpful, it is only one aspect of my investment thesis. While Nordson has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Nordson to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for NDSN’s future growth? Take a look at our free research report of analyst consensus for NDSN’s outlook.
- Financial Health: Are NDSN’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 October 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.