You probably don’t think about the packaging when you buy a box of Cheerios. But the colorful box was made with some high-tech equipment, including a sophisticated adhesive-dispensing system. Nordson makes that equipment, along with other products to apply materials such as coatings and sealants on assembly lines for everything from cereal boxes to computer circuit boards.
As a multinational industrial firm, Nordson is benefiting from an uptick in global economic growth. Yet even if global growth slows a bit, Nordson’s sales should hold up well. Companies that install the firm’s equipment will still need its spare parts and single-use items, such as disposable cartridges. Those goods create a recurring revenue stream that amounts to nearly half of the firm’s annual sales. Nordson has been expanding into the medical business, too, supplying syringes and other disposable products.
Longer term, Nordson will profit from a manufacturing trend called light-weighting, says Dave Carlsen, manager of Buffalo Discovery Fund, which owns the stock. Automakers and other industrial companies are replacing metal fasteners with adhesives and composite materials that are glued, rather than welded, making cars and other machines lighter, more fuel-efficient and cheaper to produce. “Advanced composites are the materials of the future,” Carlsen says.
Trading at 22 times earnings, Nordson’s shares are a good buy, Carlsen says. The company is on track to boost profits by 15.8% over the next year, according to analysts’ estimates. The firm pays a modest dividend, too, and has hiked its payout for 54 straight years – a streak that shows no signs of stopping now.
