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When Nordson Corporation (NasdaqGS:NDSN) announced its most recent earnings (31 October 2019), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Nordson performed requires a benchmark rather than trying to assess a standalone number at one point in time. 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 31 October 2019) of US$337m has declined by -11% 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 9.9%, indicating the rate at which NDSN is growing has slowed down. Why is this? Let's examine what's transpiring with margins and if the whole industry is feeling the heat.
In terms of returns from investment, Nordson has invested its equity funds well leading to a 21% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 11% exceeds the US Machinery industry of 7.0%, 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 19% to 16%.
What does this mean?
Though Nordson's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors affecting its business. 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 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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