Intrinsic value of Nordson Corporation - NDSN

Previous Close

$132.97

  Intrinsic Value

$89.68

stock screener

  Rating & Target

sell

-33%

Previous close

$132.97

 
Intrinsic value

$89.68

 
Up/down potential

-33%

 
Rating

sell

We calculate the intrinsic value of NDSN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 7.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  2,300
  2,353
  2,413
  2,481
  2,557
  2,639
  2,729
  2,826
  2,931
  3,044
  3,164
  3,292
  3,429
  3,574
  3,729
  3,892
  4,065
  4,248
  4,441
  4,645
  4,860
  5,088
  5,327
  5,579
  5,845
  6,124
  6,419
  6,728
  7,054
  7,397
Variable operating expenses, $m
  1,788
  1,824
  1,865
  1,912
  1,963
  2,020
  2,082
  2,148
  2,220
  2,297
  2,169
  2,257
  2,351
  2,450
  2,556
  2,668
  2,787
  2,912
  3,044
  3,184
  3,332
  3,488
  3,652
  3,825
  4,007
  4,198
  4,400
  4,612
  4,836
  5,071
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  1,788
  1,824
  1,865
  1,912
  1,963
  2,020
  2,082
  2,148
  2,220
  2,297
  2,169
  2,257
  2,351
  2,450
  2,556
  2,668
  2,787
  2,912
  3,044
  3,184
  3,332
  3,488
  3,652
  3,825
  4,007
  4,198
  4,400
  4,612
  4,836
  5,071
Operating income, $m
  513
  529
  548
  570
  593
  619
  647
  678
  711
  746
  995
  1,035
  1,078
  1,124
  1,173
  1,224
  1,278
  1,336
  1,397
  1,461
  1,529
  1,600
  1,675
  1,755
  1,838
  1,926
  2,019
  2,116
  2,218
  2,326
EBITDA, $m
  787
  805
  825
  849
  874
  903
  933
  967
  1,002
  1,041
  1,082
  1,126
  1,173
  1,222
  1,275
  1,331
  1,390
  1,453
  1,519
  1,589
  1,662
  1,740
  1,822
  1,908
  1,999
  2,095
  2,195
  2,301
  2,413
  2,530
Interest expense (income), $m
  36
  71
  73
  76
  79
  82
  85
  89
  94
  98
  103
  108
  114
  120
  127
  134
  141
  149
  157
  165
  174
  184
  194
  205
  216
  228
  241
  254
  268
  282
  298
Earnings before tax, $m
  441
  456
  472
  491
  511
  534
  558
  584
  613
  643
  887
  921
  958
  997
  1,039
  1,083
  1,130
  1,179
  1,231
  1,286
  1,344
  1,406
  1,470
  1,538
  1,610
  1,685
  1,765
  1,848
  1,936
  2,028
Tax expense, $m
  119
  123
  128
  133
  138
  144
  151
  158
  165
  174
  239
  249
  259
  269
  281
  292
  305
  318
  332
  347
  363
  380
  397
  415
  435
  455
  476
  499
  523
  548
Net income, $m
  322
  333
  345
  358
  373
  390
  407
  427
  447
  470
  647
  673
  699
  728
  759
  791
  825
  861
  899
  939
  981
  1,026
  1,073
  1,123
  1,175
  1,230
  1,288
  1,349
  1,413
  1,481

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  3,490
  3,571
  3,662
  3,765
  3,880
  4,005
  4,141
  4,289
  4,448
  4,619
  4,801
  4,996
  5,203
  5,424
  5,658
  5,906
  6,168
  6,446
  6,739
  7,049
  7,376
  7,720
  8,083
  8,466
  8,869
  9,293
  9,740
  10,210
  10,705
  11,225
Adjusted assets (=assets-cash), $m
  3,490
  3,571
  3,662
  3,765
  3,880
  4,005
  4,141
  4,289
  4,448
  4,619
  4,801
  4,996
  5,203
  5,424
  5,658
  5,906
  6,168
  6,446
  6,739
  7,049
  7,376
  7,720
  8,083
  8,466
  8,869
  9,293
  9,740
  10,210
  10,705
  11,225
Revenue / Adjusted assets
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
Average production assets, $m
  1,456
  1,489
  1,528
  1,571
  1,618
  1,671
  1,727
  1,789
  1,855
  1,927
  2,003
  2,084
  2,171
  2,263
  2,360
  2,464
  2,573
  2,689
  2,811
  2,940
  3,077
  3,220
  3,372
  3,532
  3,700
  3,877
  4,063
  4,259
  4,465
  4,682
Working capital, $m
  481
  492
  504
  519
  534
  552
  570
  591
  613
  636
  661
  688
  717
  747
  779
  813
  850
  888
  928
  971
  1,016
  1,063
  1,113
  1,166
  1,222
  1,280
  1,342
  1,406
  1,474
  1,546
Total debt, $m
  1,359
  1,405
  1,458
  1,517
  1,583
  1,655
  1,734
  1,819
  1,910
  2,009
  2,114
  2,226
  2,346
  2,473
  2,607
  2,750
  2,901
  3,061
  3,230
  3,408
  3,597
  3,795
  4,004
  4,225
  4,457
  4,701
  4,959
  5,229
  5,514
  5,814
Total liabilities, $m
  2,010
  2,057
  2,110
  2,169
  2,235
  2,307
  2,385
  2,470
  2,562
  2,660
  2,765
  2,878
  2,997
  3,124
  3,259
  3,402
  3,553
  3,713
  3,882
  4,060
  4,248
  4,447
  4,656
  4,876
  5,109
  5,353
  5,610
  5,881
  6,166
  6,465
Total equity, $m
  1,480
  1,514
  1,553
  1,597
  1,645
  1,698
  1,756
  1,818
  1,886
  1,958
  2,036
  2,118
  2,206
  2,300
  2,399
  2,504
  2,615
  2,733
  2,857
  2,989
  3,127
  3,273
  3,427
  3,590
  3,760
  3,940
  4,130
  4,329
  4,539
  4,759
Total liabilities and equity, $m
  3,490
  3,571
  3,663
  3,766
  3,880
  4,005
  4,141
  4,288
  4,448
  4,618
  4,801
  4,996
  5,203
  5,424
  5,658
  5,906
  6,168
  6,446
  6,739
  7,049
  7,375
  7,720
  8,083
  8,466
  8,869
  9,293
  9,740
  10,210
  10,705
  11,224
Debt-to-equity ratio
  0.920
  0.930
  0.940
  0.950
  0.960
  0.970
  0.990
  1.000
  1.010
  1.030
  1.040
  1.050
  1.060
  1.080
  1.090
  1.100
  1.110
  1.120
  1.130
  1.140
  1.150
  1.160
  1.170
  1.180
  1.190
  1.190
  1.200
  1.210
  1.210
  1.220
Adjusted equity ratio
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  322
  333
  345
  358
  373
  390
  407
  427
  447
  470
  647
  673
  699
  728
  759
  791
  825
  861
  899
  939
  981
  1,026
  1,073
  1,123
  1,175
  1,230
  1,288
  1,349
  1,413
  1,481
Depreciation, amort., depletion, $m
  274
  276
  277
  279
  281
  283
  286
  289
  291
  295
  87
  91
  94
  98
  103
  107
  112
  117
  122
  128
  134
  140
  147
  154
  161
  169
  177
  185
  194
  204
Funds from operations, $m
  596
  608
  622
  637
  654
  673
  693
  715
  739
  764
  734
  763
  794
  826
  861
  898
  937
  978
  1,021
  1,067
  1,115
  1,166
  1,220
  1,276
  1,336
  1,399
  1,465
  1,534
  1,607
  1,684
Change in working capital, $m
  9
  11
  13
  14
  16
  17
  19
  20
  22
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  43
  45
  47
  50
  53
  56
  58
  62
  65
  68
  72
Cash from operations, $m
  587
  597
  609
  623
  639
  656
  674
  695
  717
  741
  709
  736
  765
  796
  829
  864
  901
  939
  981
  1,024
  1,070
  1,119
  1,170
  1,224
  1,281
  1,340
  1,403
  1,470
  1,539
  1,613
Maintenance CAPEX, $m
  -62
  -63
  -65
  -66
  -68
  -70
  -73
  -75
  -78
  -81
  -84
  -87
  -91
  -94
  -98
  -103
  -107
  -112
  -117
  -122
  -128
  -134
  -140
  -147
  -154
  -161
  -169
  -177
  -185
  -194
New CAPEX, $m
  -28
  -33
  -38
  -43
  -48
  -52
  -57
  -62
  -66
  -71
  -76
  -81
  -87
  -92
  -98
  -103
  -109
  -116
  -122
  -129
  -136
  -144
  -152
  -160
  -168
  -177
  -186
  -196
  -206
  -217
Cash from investing activities, $m
  -90
  -96
  -103
  -109
  -116
  -122
  -130
  -137
  -144
  -152
  -160
  -168
  -178
  -186
  -196
  -206
  -216
  -228
  -239
  -251
  -264
  -278
  -292
  -307
  -322
  -338
  -355
  -373
  -391
  -411
Free cash flow, $m
  496
  500
  506
  514
  523
  533
  545
  558
  573
  589
  549
  568
  588
  610
  633
  658
  684
  712
  741
  773
  806
  841
  878
  918
  959
  1,003
  1,048
  1,097
  1,148
  1,202
Issuance/(repayment) of debt, $m
  40
  46
  53
  59
  66
  72
  79
  85
  92
  98
  105
  112
  120
  127
  135
  143
  151
  160
  169
  178
  188
  198
  209
  220
  232
  244
  257
  271
  285
  300
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  40
  46
  53
  59
  66
  72
  79
  85
  92
  98
  105
  112
  120
  127
  135
  143
  151
  160
  169
  178
  188
  198
  209
  220
  232
  244
  257
  271
  285
  300
Total cash flow (excl. dividends), $m
  537
  547
  559
  573
  589
  605
  624
  643
  664
  687
  654
  680
  708
  737
  768
  800
  835
  872
  910
  951
  994
  1,040
  1,088
  1,138
  1,191
  1,247
  1,306
  1,368
  1,433
  1,501
Retained Cash Flow (-), $m
  -29
  -34
  -39
  -44
  -48
  -53
  -58
  -63
  -67
  -72
  -77
  -83
  -88
  -93
  -99
  -105
  -111
  -118
  -124
  -131
  -139
  -146
  -154
  -162
  -171
  -180
  -189
  -199
  -210
  -221
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  507
  513
  520
  529
  540
  552
  566
  581
  597
  615
  577
  598
  620
  643
  668
  695
  724
  754
  786
  820
  856
  894
  934
  976
  1,020
  1,067
  1,116
  1,168
  1,223
  1,281
Discount rate, %
  5.80
  6.09
  6.39
  6.71
  7.05
  7.40
  7.77
  8.16
  8.57
  9.00
  9.45
  9.92
  10.42
  10.94
  11.48
  12.06
  12.66
  13.29
  13.96
  14.66
  15.39
  16.16
  16.97
  17.81
  18.71
  19.64
  20.62
  21.65
  22.74
  23.87
PV of cash for distribution, $m
  480
  455
  432
  408
  384
  360
  335
  310
  285
  260
  214
  192
  171
  150
  131
  112
  95
  80
  66
  53
  42
  33
  25
  19
  14
  10
  7
  5
  3
  2
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Nordson Corporation engineers, manufactures and markets differentiated products and systems used to dispense, apply and control adhesives, coatings, polymers, sealants, biomaterials, and other fluids, to test and inspect for quality, and to treat and cure surfaces. The Company's segments include Adhesive Dispensing Systems, Advanced Technology Systems and Industrial Coating Systems. The Adhesive Dispensing Systems segment delivers its precision dispensing and processing technology to various markets. The Advanced Technology Systems segment integrates its product technologies found in progressive stages of a customer's production process, such as surface treatment, precisely controlled automated, and post-dispense bond testing, optical inspection and X-ray inspection. The Industrial Coating Systems segment provides equipment used primarily for applying coatings, paint, finishes, sealants and other materials, and for curing and drying of dispensed material.

FINANCIAL RATIOS  of  Nordson Corporation (NDSN)

Valuation Ratios
P/E Ratio 25.9
Price to Sales 3.7
Price to Book 6.6
Price to Tangible Book
Price to Cash Flow 21.9
Price to Free Cash Flow 27.6
Growth Rates
Sales Growth Rate 14.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 18%
Cap. Spend. - 3 Yr. Gr. Rate 10.4%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 109.6%
Total Debt to Equity 138.3%
Interest Coverage 13
Management Effectiveness
Return On Assets 11%
Ret/ On Assets - 3 Yr. Avg. 10.9%
Return On Total Capital 12.9%
Ret/ On T. Cap. - 3 Yr. Avg. 13.3%
Return On Equity 29.5%
Return On Equity - 3 Yr. Avg. 30.8%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 55.1%
Gross Margin - 3 Yr. Avg. 54.7%
EBITDA Margin 26.5%
EBITDA Margin - 3 Yr. Avg. 24.9%
Operating Margin 22.3%
Oper. Margin - 3 Yr. Avg. 20.9%
Pre-Tax Margin 20.3%
Pre-Tax Margin - 3 Yr. Avg. 19.5%
Net Profit Margin 14.3%
Net Profit Margin - 3 Yr. Avg. 13.9%
Effective Tax Rate 29.5%
Eff/ Tax Rate - 3 Yr. Avg. 28.5%
Payout Ratio 21.6%

NDSN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NDSN stock intrinsic value calculation we used $2255 million for the last fiscal year's total revenue generated by Nordson Corporation. The default revenue input number comes from 0001 income statement of Nordson Corporation. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our NDSN stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.8%, whose default value for NDSN is calculated based on our internal credit rating of Nordson Corporation, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Nordson Corporation.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of NDSN stock the variable cost ratio is equal to 77.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for NDSN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Nordson Corporation.

Corporate tax rate of 27% is the nominal tax rate for Nordson Corporation. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the NDSN stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for NDSN are equal to 63.3%.

Life of production assets of 23 years is the average useful life of capital assets used in Nordson Corporation operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for NDSN is equal to 20.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1450.741 million for Nordson Corporation - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 57.290 million for Nordson Corporation is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Nordson Corporation at the current share price and the inputted number of shares is $7.6 billion.

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