Nordson's Earnings Momentum and Valuation Potential: A Strategic Buy for the Long Haul?

Nordson Corporation (NDSN) has long been a stalwart in the industrial sector, known for its precision dispensing and fluid control solutions. But as we approach the end of 2025, the question on investors' minds is whether this “Moderate Buy” rating from Wall Street still holds water—or if the stock's recent outperformance has already priced in its potential. Let's dissect Nordson's earnings momentum, valuation metrics, and strategic positioning to determine if this is a green light for long-term investors.

Earnings Momentum: A Tale of Two Sides

Nordson's Q2 2025 report was a mixed bag. The company beat revenue expectations by $11.6 million (1.7%) and delivered an EPS of $2.42, outpacing the $2.36 consensus. This was driven by the Atrion acquisition, which continues to outperform, and strong demand in semiconductors, medical devices, and precision agriculture. The stock surged 6.8% post-earnings, signaling investor confidence.

Yet, the story isn't all roses. While revenue grew 5% YoY to $682.94 million, EPS growth has been uneven. Over the past year, Nordson's earnings declined by 7.6%, a stark contrast to its five-year average of 8.6%. The trailing twelve months (TTM) revenue growth of 1.98% lags behind its historical 6.42% average and trails peers like Illinois Tool Works (22.94 P/E) and Parker-Hannifin (27.63 P/E).

The key takeaway? Nordson's top-line performance is resilient, but its profitability is under pressure. The company's EBITDA margin of 32% is impressive, but net profit margins have contracted from 18.2% to 16.5% in recent quarters. This raises a critical question: Can Nordson's cost discipline and strategic acquisitions offset the drag from cyclical markets like packaging and electronics?

Valuation: Expensive or Justified?

Nordson's trailing P/E of 28.32 is 10% above its 10-year average of 27.03 and slightly higher than the industry median. While this might seem steep, context matters. The company's forward guidance for Q3 2025—$710–$750 million in sales and $2.55–$2.75 in adjusted EPS—suggests management is optimistic. Analysts project 2025 EPS growth of 2.8% and 9% in 2026, which could justify a premium valuation if realized.

The PEG ratio, however, tells a different story. At a TTM earnings growth rate of 1.98%, Nordson's PEG ratio would be approximately 14.25 (28.32 ÷ 1.98). This is astronomically high for a company with such a high P/E, suggesting the stock is overvalued based on current growth. But this metric assumes growth remains stagnant. If Nordson can reignite its EPS trajectory—say, hitting the projected 9% growth in 2026—the PEG would drop to around 3.15, still elevated but more palatable for a company with high-margin, durable businesses.

Competitive Edge and Strategic Moves

Nordson's strength lies in its diversified portfolio. The Industrial Precision Solutions, Medical and Fluid Solutions, and Advanced Technology Solutions segments insulate the company from sector-specific downturns. For instance, the Atrion acquisition has bolstered its medical interventional products, a high-growth area with recurring revenue potential.

The company's balance sheet is another plus. A current ratio of 2.53 and a 16% ROE indicate solid liquidity and capital efficiency. Its 1.19% dividend yield, with a payout ratio of 31%, is also a draw for income-focused investors.

However, red flags exist. Nordson's debt-to-equity ratio of 74.8% is a drag on flexibility, and its reliance on cyclical sectors like packaging and electronics exposes it to macroeconomic risks. The recent leadership change in the Medical segment adds integration uncertainty, though tuck-in acquisitions could offset this.

The “Moderate Buy” Dilemma

Wall Street's “Moderate Buy” rating is split: five “Strong Buy” and five “Hold” calls. The mean price target of $252.11 implies a 14.6% upside from current levels. But this assumes Nordson can navigate its challenges and sustain growth.

For long-term investors, the entry point hinges on two factors: 1) Can Nordson stabilize its earnings growth and reduce debt? 2) Will its high-margin medical and industrial tech segments outperform?

The company's recent track record is mixed. While it's beaten estimates in three of four quarters, the Q2 EPS miss and declining margins are concerning. That said, Nordson's strategic focus on high-growth areas—like gas plasma treatment systems and precision agriculture—positions it to benefit from secular trends.

Final Verdict: A Calculated Bet

Nordson isn't a no-brainer buy, but it's not a no. The stock's valuation is stretched, but its long-term growth drivers—diversification, innovation, and recurring revenue from medical tech—justify a cautious entry. Investors should monitor two things: 1) The success of the Atrion integration and 2) The company's ability to delever its balance sheet.

If Nordson can execute its strategy and reignite earnings growth, the “Moderate Buy” rating could prove prescient. For those with a five-year horizon, a small position in NDSN could offer exposure to industrial innovation—just don't go all-in until the risks are mitigated.

In the end, Nordson's story is a classic case of “buy the company, not the stock.” If you believe in its long-term vision, the current valuation might be a test of patience. But if you're a contrarian, this could be the moment to buy the dip.