NDSN - Nordson upgraded to Overweight at KeyBanc on improved valuation

Nordson ( NASDAQ: NDSN ) on Wednesday was upgraded to Overweight from an investment rating of Sector Weight by analysts at KeyBanc Securities. They said the industrial-equipment company’s stock is more attractive after a recent decline.

“While still trading at a premium, we feel the current valuation provides a more attractive entry point versus recent levels,” Jeffrey Hammond, analyst at KeyBanc, said in a February 22 report.

Nordson’s ( NDSN ) shares currently trade at an enterprise value-to-EBITDA multiple of 15.9 times KeyBanc’s estimate for next-12-month earnings, compared with a historical range of 15 times to 20 times, according to the report.

Efforts by Nordson’s ( NDSN ) management to diversify its business and lessen its exposure to the highly cyclical semiconductor and consumer electronics markets is positive for its longer-term outlook, KeyBanc said. Nordson’s ( NDSN ) medical and fluid solutions business has grown from about 13% of total sales five years ago to approximately 26% currently.

Nordson’s advanced technology solutions segment “has always been the tail that wags the dog for Nordson ( NDSN ), and we have believed in buying dips around electronics weakness, while avoiding the name when electronics sentiment is too high,” according to KeyBanc.

Nordson ( NDSN ) yesterday fell 14% to a four-month low after the company missed earnings estimates and lowered its guidance for 2023. Management cited weakness in semiconductors and electronics as a reason for the revision.

KeyBanc set a price target for Nordson ( NDSN ) of $255 a share, based on an enterprise value-to-EBITDA multiple of 18.9 times and enterprise value-to-sales ratio of 6 times next-12-month estimates.

“We consider Nordson ( NDSN ) deserving of a higher multiple than what is currently baked in based on best-in-class attributes, clean balance sheet and favorable secular positioning,” according to KeyBanc. “At current levels, we feel electronics/semi sentiment has become overly negative, which offers a rare entry point to a high-quality name.”

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