When Nordson Corporation's (NASDAQ:NDSN) announced its latest earnings (30 April 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Nordson's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not NDSN actually performed well. Below is a quick commentary on how I see NDSN has performed.
Was NDSN's recent earnings decline worse than the long-term trend and the industry?
NDSN's trailing twelve-month earnings (from 30 April 2019) of US$322m has declined by -15% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 11%, indicating the rate at which NDSN is growing has slowed down. What could be happening here? Let's examine what's transpiring with margins and whether the entire industry is facing the same headwind.
In terms of returns from investment, Nordson has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 11% exceeds the US Machinery industry of 7.7%, indicating Nordson has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Nordson’s debt level, has declined over the past 3 years from 16% to 15%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 72% to 94% over the past 5 years.
What does this mean?
Nordson's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors impacting its business. I recommend you 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 30 April 2019. This may not be consistent with full year annual report figures.
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