On Wednesday, Loop Capital Markets upgraded Nordson Corporation (NASDAQ:NDSN) stock from Hold to Buy, simultaneously increasing the price target to $280 from $255.
The upgrade comes on the heels of Loop Capital’s analysis of Nordson’s key customers, which has bolstered their confidence in the company’s prospects for organic sales growth through the fiscal year 2025 (FY25).
According to InvestingPro data, Nordson maintains impressive gross profit margins of 55.25% and operates with a moderate level of debt, with a healthy current ratio of 2.41.
The analysts at Loop Capital highlighted the potential for improved demand within the interventional solutions space, which could lead to a more robust outlook for Nordson’s Medical (TASE:PMCN) Fluid Solutions (MFS) segment in the second half of the fiscal year. This is in contrast to the flat or negative market guidance previously implied, with expectations now leaning towards mid-single-digit market growth.
Nordson, described as a quality compounder, has reportedly been trading at a discount due to the cyclical headwinds it faced over the past 18 months.
Loop Capital sees the current valuation as an attractive entry point for investors, noting the company’s long-term earnings per share (EPS) growth of over 10% and a compound annual growth rate (CAGR) of 10% from 2014 to 2024. The company has maintained dividend payments for 46 consecutive years, demonstrating strong financial stability.
InvestingPro research reveals several additional positive indicators about Nordson’s financial health and growth prospects. Subscribers can access the comprehensive Pro Research Report, which provides detailed analysis of the company’s valuation metrics and growth trajectory.
The firm also anticipates improvements in both the MFS and Advanced Technology Solutions (ATS) segments. Mergers and acquisitions (M&A) are expected to continue driving growth for Nordson, potentially offsetting risks from further strengthening of the U.S. dollar, which has been factored into the revised estimates.
Loop Capital’s revised price target of $280 is based on approximately 28 times their forecasted FY25 EPS and 26 times the FY26 EPS forecast. This valuation is above the 5-year median multiple of 25 times. The new price target also takes into account a return to Nordson’s historical premium compared to the Russell 2000 index, moving from a current 0.87 discount to a 1.11 times 5-year median.
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