nordson corporation · nordson is a market leader in all three operating segment markets with the...

USF Student Managed Investment Fund 1

Nordson Corporation (NASDAQ: NDSN)

Industrial Equipment

Executive Summary

Nordson Corporation is a dominant industry leader in the provision of

dispensing equipment, fluid management technology, and industrial

coating systems. Nordson’s operating segments are positioned in rapidly

growing niche and emerging markets providing the optimal scenario for

Nordson to capitalize on growth opportunities. Mega-trends such as

increasing demand for automation, miniaturization, an aging population,

and ongoing technological innovation provide tailwinds for their key end

markets. Strategic initiatives focusing on significant margin expansion and a

multi-faceted growth strategy will exemplify their status as a cash cow

generating superb free cash flows equating to 100% of their net income. On

a relative and absolute basis, the current price of $134.80 provides a

favorable entry point to capture the double-digit return Nordson offers that

has generally been overlooked by the market due to its mid-cap market

value.

Investment Thesis

➢ Multi-facet strategic growth strategy

➢ Dominant market position and pricing power

➢ Margin expansion

➢ Restructuring and consolidation initiatives

➢ Attractive dividend policy

➢ Supporting mega-trends and macro tailwinds

➢ Relative and absolute undervaluation

-25.0%

0.0%

25.0%

50.0%

75.0%

100.0%

125.0%

Feb-13 Feb-14 Feb-15 Feb-16 Feb-17

S&P 500 NDSN

March 6th, 2018

Recommendation: Buy

Current and Target Price:

Current Price (March 2nd, 2017) $134.80

Intrinsic Value $168.31

2-Year Target Price $205.54

52-Week Range $151.84 – 107.16

Beta 1.51

Market Data:

Shares Outstanding (M) 57.72

Avg. Daily Trading Vol. 243,230

Market Cap. (M) $8,029.0

Book Value (Report date) $20.02

Dividend/Yield $1.11/0.88%

ROA 10.1%

ROE 29.5%

ROIC 14.0%

FCF/Share $4.78

EPS $5.08

P/E 24.94

P/BV 6.33

LT Debt (M)/% Total Cap $1,256/46.0%

Company Description:

Nordson Corp. engages in the engineering,

manufacture, and market of products and

systems used for adhesives, coatings, sealants,

biomaterials, and other materials. It operates

through three segments: Adhesive Dispensing

Systems, Advanced Technology Systems, and

Industrial Coating Systems. The company was

founded by Eric T. Nord, Evan W. Nord, and

Walter G. Nord in 1954 and is headquartered in

Westlake, OH.

Analysts:

Matthew Gladdish, [email protected]

Rafael Grigoryan, [email protected]

Maithilee Pagay, [email protected]

Mark Smyslov, [email protected]

Source: FactSet

mailto:[email protected]




Nordson Corp. | NASDAQ: NDSN | Company Brief | March 6, 2018


Income Statement

Nor

dson

Cor

p. -

Inco

me

Stat

emen

tFY

08A

FY09

AFY

10A

FY11

AFY

12A

FY13

AFY

14A

FY15

AFY

16A

FY17

AFY

18E

FY19

EFY

20E

FY21

EFY

22E

($ in

mill

ions

)

Tota

l Sal

es1,

124.

881

9.2

1,04

1.6

1,23

3.2

1,40

9.6

1,54

2.9

1,70

4.0

1,68

8.7

1,80

9.0

2,06

7.0

2,31

02,

472.

62,

642.

22,

818.

12,

999.

9

Sale

s Gro

wth

-27.

2%27

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18.4

%14

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9.5%

10.4

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7.1%

14.3

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7.1%

6.9%

6.7%

6.5%

Adh

esiv

e Di

spen

sing

Syst

ems

580.

746

0.7

525.

361

1.9

684.

179

3.5

899.

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6.1

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6.0

972.

81,

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21,

091.

01,

152.

11,

214.

3

% o

f Sal

es51

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56.2

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49.6

%48

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51.4

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49.5

%48

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44.3

%42

.1%

41.7

%41

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40.9

%40

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Adv

ance

d Te

chno

logy

Sys

tem

s36

7.4

242.

236

9.4

438.

651

6.0

516.

356

1.8

593.

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6.3

897.

61,

075.

61,

172.

41,

274.

41,

381.

51,

493.

4

% o

f Sal

es32

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29.6

%35

.5%

35.6

%36

.6%

33.5

%33

.0%

35.2

%37

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43.4

%46

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47.4

%48

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49.0

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Indu

stria

l Coa

ting

Syst

ems

176.

811

6.2

146.

818

2.6

209.

523

3.2

242.

525

8.7

253.

125

3.3

261.

226

9.0

276.

828

4.6

292.

3

% o

f Sal

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14.2

%14

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14.8

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15.1

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15.3

%14

.0%

12.3

%11

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10.9

%10

.5%

10.1

%9.

7%

Cost

of S

ales

(494

.4)

(350

.2)

(419

.9)

(484

.7)

(586

.3)

(676

.8)

(758

.9)

(774

.7)

(815

.5)

(928

.0)

(1,0

27)

(1,0

88.0

)(1

,151

.0)

(1,2

15.4

)(1

,280

.8)

% o

f Sal

es44

.0%

42.8

%40

.3%

39.3

%41

.6%

43.9

%44

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45.9

%45

.1%

44.9

%44

.4%

44.0

%43

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43.1

%42

.7%

Adh

esiv

e Di

spen

sing

Syst

ems

(255

.2)

(197

.0)

(211

.8)

(240

.5)

(284

.5)

(348

.1)

(400

.7)

(383

.6)

(396

.5)

(411

.3)

(432

.4)

(453

.7)

(475

.3)

(496

.9)

(518

.4)

Adv

ance

d Te

chno

logy

Sys

tem

s(1

61.5

)(1

03.6

)(1

49.0

)(1

72.4

)(2

14.6

)(2

26.5

)(2

50.2

)(2

72.4

)(3

04.9

)(4

03.0

)(4

78.1

)(5

15.9

)(5

55.2

)(5

95.8

)(6

37.6

)

Indu

stria

l Coa

ting

Syst

ems

(77.

7)(4

9.7)

(59.

2)(7

1.8)

(87.

1)(1

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)(1

08.0

)(1

18.7

)(1

14.1

)(1

13.7

)(1

16.1

)(1

18.4

)(1

20.6

)(1

22.7

)(1

24.8

)

Gros

s Pro

fit63

0.4

468.

962

1.6

748.

482

3.3

866.

194

5.1

914.

099

3.5

1,13

9.0

1,28

31,

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61,

491.

21,

602.

81,

719.

1

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56.0

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59.7

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58.4

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55.5

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54.9

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55.6

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56.4

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57.3

%

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ng a

nd A

dmin

istra

tive

Expe

nses

(374

.5)

(285

.5)

(338

.3)

0.0

(422

.3)

(461

.4)

(493

.5)

(472

.9)

(477

.7)

(535

.6)

(597

.5)

(638

.8)

(681

.5)

(725

.8)

(771

.5)

% o

f Sal

es33

.3%

34.8

%32

.5%

0.0%

30.0

%29

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29.0

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26.4

%25

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25.9

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25.8

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25.7

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Rese

arch

and

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men

t(3

3.6)

(25.

5)(2

3.8)

(27.

0)(3

6.5)

(48.

0)(4

7.5)

(46.

7)(4

6.2)

(52.

5)(6

0.1)

(64.

3)(6

8.7)

(73.

3)(7

8.0)

% o

f Sal

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0%3.

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6%

Oth

er E

xpen

ses

(5.6

)(2

59.4

)(2

.0)

(3.4

)(4

.6)

(1.1

)(2

.6)

(11.

4)(1

0.8)

(2.4

)(1

.0)

0.0

0.0

0.0

0.0

EBIT

DA21

6.8

(101

.5)

257.

571

8.0

359.

935

5.6

401.

638

2.9

458.

754

8.5

624

681.

674

1.0

803.

786

9.6

EBIT

DA M

argi

n19

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-12.

4%24

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58.2

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23.0

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22.7

%25

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26.5

%27

.0%

27.6

%28

.0%

28.5

%29

.0%

Depr

ecia

tion

& A

mor

tizat

ion

(26.

4)(2

6.3)

(22.

6)(2

0.8)

(24.

5)(3

1.8)

(34.

4)(6

5.2)

(70.

3)(9

0.9)

(98.

3)(9

7.6)

(96.

6)(9

0.7)

(86.

2)

EBIT

190.

3(1

27.8

)23

4.8

697.

333

5.5

323.

836

7.1

317.

738

8.4

457.

752

658

4.0

644.

471

3.0

783.

4

Ope

ratin

g M

argi

n16

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-15.

6%22

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56.5

%23

.8%

21.0

%21

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18.8

%21

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22.1

%22

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23.6

%24

.4%

25.3

%26

.1%

Tota

l Oth

er In

com

e / E

xpen

se(1

0.6)

0.6

(3.5

)(1

.0)

(9.2

)(1

2.7)

(14.

6)(1

6.9)

(19.

9)(3

7.4)

(30.

6)(3

3.2)

(37.

3)(3

7.9)

(39.

6)

Int

eres

t Exp

ense

- N

et(1

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(7.3

)(5

.4)

(4.5

)(1

0.7)

(14.

4)(1

4.5)

(17.

5)(2

0.6)

(35.

5)(3

0.6)

(33.

2)(3

7.3)

(37.

9)(3

9.6)

EBT

179.

8(1

27.2

)23

1.3

696.

332

6.3

311.

135

2.5

300.

936

8.5

420.

349

5.6

550.

860

7.1

675.

074

3.8

EBT

Mar

gin

16.0

%-1

5.5%

22.2

%56

.5%

23.1

%20

.2%

20.7

%17

.8%

20.4

%20

.3%

21.5

%22

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23.0

%24

.0%

24.8

%

Inco

me

Taxe

s(6

2.3)

(32.

9)(6

3.3)

(92.

2)(1

01.4

)(8

9.3)

(105

.7)

(89.

8)(9

6.7)

(124

.5)

(123

.9)

(137

.7)

(151

.8)

(168

.8)

(185

.9)

Net

Inco

me

117.

5(1

60.1

)16

8.0

604.

122

4.8

221.

824

6.8

211.

127

1.8

295.

837

1.7

413.

145

5.3

506.

355

7.8

YoY

Grow

th-2

36.2

%-2

05.0

%25

9.5%

-62.

8%-1

.3%

11.3

%-1

4.5%

28.8

%8.

8%25

.7%

11.1

%10

.2%

11.2

%10

.2%

Net P

rofit

Mar

gin

10.4

%-1

9.5%

16.1

%49

.0%

16.0

%14

.4%

14.5

%12

.5%

15.0

%14

.3%

16.1

%16

.7%

17.2

%18

.0%

18.6

%

Basic

Sha

res O

utst

andi

ng67

.567

.168

.467

.664

.464

.263

.760

.757

.157

.556

.054

.252

.751

.750

.3

Dilu

ted

Shar

es O

utst

andi

ng68

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.168

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.257

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.256

.654

.953

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.451

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Tota

l Sha

res O

utst

andi

ng67

.467

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.965

.664

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.262

.457

.457

.357

.756

.254

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.3

Per S

hare

EPS

(Bas

ic)

$1.7

4($

2.38

)$2

.46

$8.9

3$3

.49

$3.4

5$3

.88

$3.4

8$4

.76

$5.1

4$6

.64

$7.6

2$8

.64

$9.8

0$1

1.09

EPS

(Dilu

ted)

$1.7

1($

2.38

)$2

.46

$8.8

3$3

.45

$3.4

2$3

.84

$3.4

5$4

.73

$5.0

8$6

.56

$7.5

3$8

.53

$9.6

6$1

0.92

Divi

dend

s per

Sha

re$0

.37

$0.3

7$0

.39

$0.4

4$0

.53

$0.6

3$0

.76

$0.9

0$0

.99

$1.1

1$1

.51

$1.8

1$2

.16

$2.5

7$3

.06

Divi

dend

Pay

out R

atio

(%)

21.3

%0.

0%15

.9%

4.9%

15.2

%18

.2%

19.6

%25

.9%

20.8

%21

.6%

22.7

%23

.8%

25.0

%26

.2%

27.6

%

Book

Val

ue p

er S

hare

$8.5

1$5

.51

$7.3

8$8

.45

$10.

40$1

3.83

$14.

21$1

0.88

$14.

92$2

0.09

$22.

58$2

5.62

$30.

71$3

5.64

$40.

42

Cash

Flo

w p

er S

hare

$1.6

9$2

.51

$2.0

5$3

.65

$4.2

6$4

.18

$4.5

3$4

.32

$5.8

0$6

.08

$6.9

5$7

.81

$8.8

2$9

.94

$10.

97

Free

Cas

h Fl

ow p

er S

hare

$1.2

8$2

.33

$1.8

4$3

.31

$3.7

4$3

.41

$3.8

0$3

.27

$4.7

0$4

.78

$6.1

7$7

.05

$8.1

1$9

.24

$10.

28



Scenario Analysis

To accurately capture the growth that we expect within each segment of Nordson based on our

research and analysis, we established bear, base, and bull scenarios for each segment as a multiple of

global GDP growth. Global GDP was used due to Nordson’s substantial exposure to international and

emerging markets. In our base case scenario, the ADS, ATS, and ICS segments will grow at 2x, 3x, 1x

global GDP respectively. Further through our scenario analysis, we can see how each growth rate

assumption affects overall sales growth, operating margins for the respective year.

Growth Outlook FY18E FY19E FY20E FY21E FY22E

Global GDP 3.1% 3.0% 2.9% 2.8% 2.7%

Scenario Analysis FY18E FY19E FY20E FY21E FY22E

ADS

Bull 4.0x 4.0x 4.0x 4.0x 4.0x

Base 2.0x 2.0x 2.0x 2.0x 2.0x

Bear 1.0x 1.0x 1.0x 1.0x 1.0x

ATS

Bull 6.0x 6.0x 6.0x 6.0x 6.0x

Base 3.0x 3.0x 3.0x 3.0x 3.0x

Bear 1.5x 1.5x 1.5x 1.5x 1.5x

ICS

Bull 2.0x 2.0x 2.0x 2.0x 2.0x

Base 1.0x 1.0x 1.0x 1.0x 1.0x

Bear 0.5x 0.5x 0.5x 0.5x 0.5x

Scenario Case Base

ADS 6.2% 6.0% 5.8% 5.6% 5.4%

ATS 9.3% 9.0% 8.7% 8.4% 8.1%

ICS 3.1% 3.0% 2.9% 2.8% 2.7%

Source: World Bank

Scenario Analysis FY18E FY19E FY20E FY21E FY22E

Sales ($MM)

Bull $2,458 $2,806 $3,194 $3,625 $4,101

Base $2,310 $2,473 $2,642 $2,818 $3,000

Bear $2,236 $2,314 $2,393 $2,472 $2,551

Sales Growth (%)

Bull 18.9% 14.2% 13.8% 13.5% 13.1%

Base 11.7% 7.1% 6.9% 6.7% 6.5%

Bear 8.2% 3.5% 3.4% 3.3% 3.2%

Operating Margin (%)

Bull 23.0% 24.1% 25.0% 26.0% 26.9%

Base 22.8% 23.6% 24.4% 25.3% 26.1%

Bear 22.6% 23.3% 24.0% 24.8% 25.6%

EPS (Diluted)

Bull $7.09 $8.78 $10.70 $12.95 $15.61

Base $6.56 $7.53 $8.53 $9.66 $10.92

Bear $6.30 $6.93 $7.55 $8.25 $9.01

Intrinsic Value ($) Upside (%)

Bull $195.01 44.7%

Base $168.57 25.1%

Bear $154.70 14.8%

Average $172.76 28.2%



Investment Thesis

Multi-facet Strategic Growth Strategy. Nordson possesses a multi-facet growth strategy that is

strategically comprised of both organic and acquisitive growth. In 2017 organic growth and acquisitive

growth accounted for 7.9% and 6.9% of annual revenue growth respectively. Guidance estimates

organic growth to be 2x global GDP growth in the years leading to 2022 falling in line with historical

performance. Our analysis confidently concludes that due to secular trends from aging populations,

ongoing technological advances, and a growing middle class in emerging markets the growth guidance

is set to continue over a longer time frame and at greater multiple, with revenue and net income

growing by 5-year CAGRs of 7.73% and 13.53% respectively in the years leading to 2022. Additional

growth unaccounted for in our projections could potentially arise from further acquisition activity.

Based on our analysis, complementing analyst and company guidance, NDSN will be able incrementally

increase sales by $60-100 million, roughly 3% to 5% of the current revenue base, annually via M&A.

This incremental increase translates into $0.35 –$0.55 improvement in normalized earnings power.

1,688.7 1,809.0 2,067.0

2,310 2,472.6

2,642.2 2,818.1

2,999.9

y = 191.83x + 1487.7R² = 0.9947

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

4,000.0

FY15A FY16A FY17A FY18E FY19E FY20E FY21E FY22E

Revenue ($mm)

211.1 271.8 295.8

371.7 413.1

455.3 506.3

557.8

y = 49.038x + 164.7R² = 0.9952

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0


Net Income ($mm)



Dominant Market Position and Pricing Power. Favorable conditions in Nordson’s three core operating

segments will allow Nordson to capture further a dominant market position that will provide pricing

power 15-25 % greater than the corresponding market. Nordson is a market leader in all three

operating segment markets with the most significant presence in the adhesive dispensing market,

controlling greater than 70 %. Contributing factors to Nordson’s market dominance include:

➢ Operating in fragmented and decentralized markets with few competitors. Market competition

is comprised of small divisions of larger organizations and miniscule regional competitors.

➢ A competitive advantage derived from innovation and specialization in niche markets.

➢ Great scale that provides substantial resources to reinvest into innovation and growth

initiatives allowing Nordson to service end customers that are unreachable by its competitors.

Through our analysis, ROIC is expected to increase to 15.7% by 2021 reflecting further efficiency

in allocating capital far beyond its peers.

Margin Expansion, Restructuring, and Consolidation Initiatives. Since 2001 Nordson has notably

improved its profitability by 1,600 bps through the adoption of its LEAN/Six Sigma Principles which

increased productivity by removing waste in the business process. Additional margin expansion began

in 2012 as Nordson invested $580 million into five acquisitions for its polymer business and had

successfully integrated each to improve profitability. Through our analysis, further operational

efficiencies will prevail as Nordson completes consolidation efforts of U.S. dye facilities from 3 to 1 and

a 2 to 1 consolidation of its polymer

operations in Europe in 2018.

Additionally, the restructuring of

business segments towards higher

margin operations will provide

tailwinds for margin expansion.

Currently, Nordson is investing heavily

in its higher margin medical equipment

operations, such as its recent

acquisition of Vention Medical while

phasing out operations in lower margin

segments such as industrial coating

systems. These strategic consolidations

and restructuring initiatives are a

critical driver for the expansion of

operating margins from 22.1% to 26.1% by 2022 providing greater profitability and therefore greater

cash that can be returned to shareholders.

18.8%

21.5% 22.1% 22.8% 23.6% 24.4%25.3% 26.1%

y = 0.0093x + 0.1891R² = 0.9513

0.0%

3.0%

6.0%

9.0%

12.0%

15.0%

18.0%

21.0%

24.0%

27.0%

30.0%


Operating Margin



Attractive Dividend Policy. Nordson

Corporation prides itself on being

one of the only 15 public companies

that have increased their dividends

for more than 50 consecutive years.

As of 2017, the company has paid

54 years of consecutively increasing

dividends with a current dividend

payout ratio of 21.9 and a dividend

ratio of 1.11. In 2017, the company

paid a dividend of $0.30 per share.

This trend shows the company’s

consistent focus on shareholder

returns.

Mega-trends and Macro Tailwinds. Nordson’s three core business segments operate in numerous key end

markets with growth characteristics that are supported by underlying mega-trends and macro tailwinds.

➢ The disposable hygiene products market is expected to grow significantly due to increased consumer

spending due to increase in disposable income, increasing concerns for safety, convenience, and

hygiene, and increasing penetration in developing countries like India and China.

➢ Growing demand for ready-to-eat meals, frozen foods, and dried processed food is expected to drive

the industry growth. The recent shift to flexible packaging and the expected 2.9% CAGR growth in the

➢ The Advanced Technology Systems segment is expected to achieve an organic growth of 2 to 3 times

that of global GDP due to the growing mobile computing industry, rapidly evolving minimally invasive

medical technology, and the increasing demand for semiconductors, circuit shrinkage, and flexible

circuit demand.

➢ The minimally invasive technology market is expected to grow at a CAGR of 11.3% to 2024 and the

aging population is expected to grow significantly with 1.045 billion people expected to fall in the age

group of 60 years and above. These trends will increase the sales for Nordson’s minimally invasive

catheters and fluid management systems.

➢ The semiconductor industry is expected to grow at a CAGR of 5.11% over the period of 2015-2020 with

the global semiconductor packaging market growing with a CAGR of 15.7% during the same period.

0

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18

Dividend Per Share



Mega-trends and Macro Tailwinds

➢ The growing e-sports industry and the resulting demand for advanced graphics chips will contribute to

growth in Nordson’s packaging and adhesive dispensing systems.

➢ The increase in demand for wearable electronics and smart devices is rapidly increasing the need for

flexible packaging and printed circuit board assembly will drive the advanced technology systems

segment substantially.

➢ The Industrial Coating Systems segment is expected to grow organically at a rate higher than the

global GDP growth rate due to the growing aerospace industry, and increased focus on light-weighting

of vehicles.

➢ The aerospace coating market is expected to reach $2433 million by 2023 through a CAGR of 6.3%.

Moreover, the need for regular maintenance of aircrafts and the benefits of light-weighting will

continue to drive this demand. An increased defense spending acts as a subordinate tailwind to this

growth.



Relative Valuation and Absolute Valuation

P/E Multiple Model

At a current price of $134.80, NDSN is trading at 19.0x FY18 earnings as compared to a historical forward

earnings multiple of 17.7x. The consideration of the P/E Multiple Contraction Model implies that Nordson is

trading slightly higher as compared to its historical multiples. Based upon this model, we established the two-

year price target of Nordson at $205.54.

A sensitivity analysis was conducted to reflect the variation in stock price due to fluctuation in both EPS and

the P/E multiple.

P/E Multiple Model FY15A FY16A FY17A FY18E FY19E FY20E FY21E FY22E

($ in millions)

Revenue 1,689 1,809 2,067 2,310 2,473 2,642 2,818 3,000

Sales Growth 7.1% 14.3% 11.7% 7.1% 6.9% 6.7% 6.5%

EPS $3.48 $4.76 $5.14 $6.64 $7.62 $8.64 $9.80 $11.09

YoY Growth 36.9% 7.9% 29.2% 14.8% 13.4% 13.4% 13.2%

P/E Multiple 20.1x 20.7x 24.5x 26.8x 24.3x 23.8x 23.3x 22.8x

Stock Price $70.10 $98.77 $126.15 $178.21 $185.01 $205.54 $228.48 $253.44

Trailing PEG Ratio 0.55 0.56 3.10 0.92 1.64 1.78 1.74 1.73

Fwd PEG Ratio 0.55 2.62 0.84 1.82 1.82 1.77 1.77

$6.08 $6.13 $6.17 $8.64 $6.26 $6.30 $6.35

20.8x $126.4 $127.4 $128.3 $179.6 $130.1 $131.0 $132.0

21.8x $132.5 $133.5 $134.4 $188.3 $136.4 $137.3 $138.3

22.8x $138.6 $139.6 $140.6 $196.9 $142.6 $143.6 $144.6

23.8x $144.7 $145.7 $146.8 $205.54 $148.9 $149.9 $151.0

24.8x $150.8 $151.9 $153.0 $214.2 $155.2 $156.2 $157.3

25.8x $156.9 $158.0 $159.1 $222.8 $161.4 $162.5 $163.7

26.8x $162.9 $164.1 $165.3 $231.5 $167.7 $168.9 $170.0

13.8% 13.9% 14.0% 14.1% 14.2% 14.3% 14.4%

EPS

P/E Sensitivity Analysis 2020 - Base Case

P/E

Mu

ltip

le

Net Income Margin



EV/EBITDA Multiple Model

At a current price of $134.80, NDSN is trading at 12.1x FY18 earnings as compared to a historical average of

11x. The consideration of the EV/EBITDA Multiple Model imply that Nordson is trading slightly higher as

compared to its historical multiples.

A sensitivity analysis was conducted to reflect the variation in stock price due to fluctuation in both EBITDA

and the EV/EBITDA multiple.

EV/EBITDA Multiple Model FY15A FY16A FY17A FY18E FY19E FY20E FY21E FY22E

($ in millions)

Revenue 1,689 1,809 2,067 2,310 2,473 2,642 2,818 3,000

Sales Growth 7.1% 14.3% 11.7% 7.1% 6.9% 6.7% 6.5%

EBIT 318 388 458 526 584 644 713 783

Operating Margin 18.8% 21.5% 22.1% 22.8% 23.6% 24.4% 25.3% 26.1%

Depreciation & Amortization (65) (70) (91) (98) (98) (97) (91) (86)

EBITDA 383 459 549 624 682 741 804 870

EBITDA Margin 22.7% 25.4% 26.5% 27.0% 27.6% 28.0% 28.5% 29.0%

EV/EBITDA Multiple 13.8x 14.2x 15.4x 15.0x 14.4x 13.8x 13.3x 12.7x

Enterprise Value 5,294 6,511 8,424 9,367 9,815 10,243 10,655 11,068

Less: Debt 1,093 943 1,256 1,362 991 1,052 534 652

Plus: Cash 50 67 90 90 93 87 91 91

Market Cap 4,251 5,636 7,258 8,095 8,916 9,278 10,212 10,506

Shares Outstanding 60.7 57.1 57.5 56.0 54.2 52.7 51.7 50.3

Equity Value / Share $70.10 $98.77 $126.15 $144.63 $164.51 $176.07 $197.67 $208.92

701.4 714.6 727.8 741.0 754.2 767.4 780.6

10.8x $125.7 $128.5 $131.2 $133.9 $136.6 $139.3 $142.0

11.8x $139.1 $142.0 $145.0 $147.9 $150.9 $153.9 $156.8

12.8x $152.4 $155.6 $158.8 $162.0 $165.2 $168.4 $171.7

13.8x $165.7 $169.1 $172.6 $176.1 $179.5 $183.0 $186.5

14.8x $179.0 $182.7 $186.4 $190.1 $193.8 $197.6 $201.3

15.8x $192.3 $196.3 $200.2 $204.2 $208.2 $212.1 $216.1

16.8x $205.6 $209.8 $214.0 $218.3 $222.5 $226.7 $230.9

26.5% 27.0% 27.5% 28.0% 28.5% 29.0% 29.5%

EBITDA Margin

EBITDA

EV/EBITDA Sensitivity Analysis 2020 - Base Case

EV/E

BIT

DA

Mu

ltip

le



Discounted Cash Flow Model

After a thorough analysis of Nordson’s keys drivers including the

consolidation and restructuring of its key operations, margin expansion,

and it multi-facet strategic growth strategy, Nordson’s free cash flows

were forecasted through 2022. The discounted cash flow model

determines that Nordson has an intrinsic value of $168.57, representing

a 25% upside. Fundamental assumptions in our forecasts include a long-

term growth rate of 3% reflecting the growth rate characteristic of

emerging markets, cost of debt at 3% to reflect the possible fluctuation in

Nordson’s variable rate debt facilities, accompanied by a 13.57% cost of

equity to arrive at our WACC assumption of 7.03%.

A price sensitivity was conducted to depict how the effects of variation in

both the future growth assumption and the WACC assumption would

affect the intrinsic value of Nordson.

Discounted Cash Flow FY08A FY09A FY10A FY11A FY12A FY13A FY14A FY15A FY16A FY17A FY18E FY19E FY20E FY21E FY22E

($ in millions) 1 2 3 4 5

Sales 1,125 819 1,042 1,233 1,410 1,543 1,704 1,689 1,809 2,067 2,310 2,473 2,642 2,818 3,000

Sales Growth -27.2% 27.1% 18.4% 14.3% 9.5% 10.4% -0.9% 7.1% 14.3% 11.7% 7.1% 6.9% 6.7% 6.5%

COGS (494) (350) (420) (485) (586) (677) (759) (775) (815) (928) (1,027) (1,088) (1,151) (1,215) (1,281)

% of Sales 43.95% 42.76% 40.32% 39.31% 41.59% 43.86% 44.54% 45.88% 45.08% 44.90% 44.45% 44.00% 43.56% 43.13% 42.70%

Gross Profit 630 469 622 748 823 866 945 914 993 1,139 1,283 1,385 1,491 1,603 1,719

SG&A (414) (570) (364) (30) (463) (511) (544) (531) (535) (590) (659) (703) (750) (799) (849)

% of Sales 36.8% 69.6% 35.0% 2.5% 32.9% 33.1% 31.9% 31.4% 29.6% 28.6% 28.5% 28.4% 28.4% 28.4% 28.3%

EBIT 190 (128) 235 697 335 324 367 318 388 458 526 584 644 713 783

EBIT Margin 16.9% -15.6% 22.5% 56.5% 23.8% 21.0% 21.5% 18.8% 21.5% 22.1% 22.8% 23.6% 24.4% 25.3% 26.1%

D&A (26) (26) (23) (21) (24) (32) (34) (65) (70) (91) (98) (98) (97) (91) (86)

EBITDA 217 (101) 257 718 360 356 402 383 459 549 624 682 741 804 870

EBITDA Margin 19.3% -12.4% 24.7% 58.2% 25.5% 23.0% 23.6% 22.7% 25.4% 26.5% 27.0% 27.6% 28.0% 28.5% 29.0%

Increase in NWC (21) 30 (74) (9) (4) (19) (34) (30) (28) (57) (81) (87) (87) (83) (93)

CAPEX (22) 5 (14) (20) (19) (40) (43) (61) (58) (64) (67) (66) (66) (65) (64)

CapEx/Depreciation 0.8x -0.2x 0.6x 1.0x 0.8x 1.2x 1.2x 0.9x 0.8x 0.7x 0.7x 0.7x 0.7x 0.7x 0.7x

25.0% Unlevered Tax (EBIT) (48) (32) (59) (174) (84) (81) (92) (79) (97) (114) (132) (146) (161) (178) (196)

FCFF 127 (99) 112 515 253 216 232 213 276 314 345 382 427 477 517

DF 93.44% 87.30% 81.57% 76.22% 71.21%

PV of FCFF 322.58 333.60 348.69 363.64 368.08

Sum of FCFF 1,736.60$

Terminal Value

LT Growth Rate 3.00%

WACC 7.03%

FCF (T+1) 516.9 Terminal Value 13,225.6 Discount Factor 71.21%

PV of TV $9,418.48

EV To Equity Value

Enterprise Value 11,155.1

Less: Net Debt 1,608.2

Equity Value (M. Cap) 9,546.8

Diluted Shares Outstanding 56.63

Equity Value/Share $168.57

WACC

Cost of Debt 3.00%

After-Tax Cost of Debt 2.25%

Cost of Equity 13.57%

Debt Weighting 57.8%

Equity Weighting 42.2%

WACC 7.03%

Tax Rate 25.00%

CAPM

Risk-Free Rate 2.62%

Beta 1.51

Market Premium 7.25%

CAPM 13.57%

$168.57 2.00% 2.25% 2.50% 2.75% 3.00% 3.25% 3.50% 3.75% 4.00%

5.83% $186.7 $200.0 $215.3 $233.1 $254.0 $279.0 $309.4 $347.1 $395.1

6.03% $175.8 $187.7 $201.2 $216.9 $235.1 $256.6 $282.3 $313.8 $352.9

6.23% $165.9 $176.5 $188.6 $202.5 $218.5 $237.1 $259.2 $285.8 $318.3

6.43% $156.9 $166.5 $177.4 $189.7 $203.8 $220.2 $239.3 $262.0 $289.4

6.63% $148.7 $157.4 $167.2 $178.2 $190.8 $205.2 $221.9 $241.6 $265.0

6.83% $141.1 $149.1 $157.9 $167.8 $179.1 $191.9 $206.6 $223.8 $243.9

7.03% $134.2 $141.4 $149.5 $158.5 $168.6 $180.0 $193.1 $208.1 $225.7

7.23% $127.8 $134.4 $141.8 $149.9 $159.1 $169.3 $181.0 $194.3 $209.7

7.43% $121.9 $128.0 $134.7 $142.1 $150.4 $159.7 $170.1 $182.0 $195.6

7.63% $116.3 $122.0 $128.1 $134.9 $142.5 $150.9 $160.3 $170.9 $183.1

7.83% $111.2 $116.4 $122.1 $128.3 $135.2 $142.9 $151.4 $161.0 $171.8

8.03% $106.4 $111.2 $116.5 $122.2 $128.6 $135.5 $143.3 $152.0 $161.7

8.23% $102.0 $106.4 $111.3 $116.6 $122.4 $128.8 $135.9 $143.7 $152.5

Price Sensitivity - Base Case

Future Growth

WA

CC



Relative Valuation

At a current price of $134.80, NDSN is trading at 26.9x FY2017 earnings, which is relatively expensive

compared to the past 5-year range of 19.9x-21.2x, and at forward 19.0x FY2018 earnings. Relative to

peers, the company is trading at a slight 4.1% discount to group’s average of 28.0x FY2017 P/E and a

great 10.9% discount to group’s average of trading at 21.3x FY2018 earnings.

At the same time, NDSN is currently trading at 15.4x FY2017 EV/EBITDA compared to a 5-year historical

average of 13.1x, ranging from 11.6x-14.2x. Compared to its peer group, NDSN is trading at an

attractive 15.4% discount to the pier group average 18.2x FY2017 EV/EBITDA multiple.

Company Ticker Price (USD) Mkt. Cap ($mm) EV/EBITDA TTM P/E FWD P/E P/S

Nordson NDSN $134.80 7,916 15.4x 26.9x 19.0x 3.9x

AMETEK AME $74.52 17,757 17.3x 26.1x 22.4x 4.2x

Graco GGG $44.08 7,625 18.5x 31.0x 22.6x 5.4x

IDEX IEX $137.45 10,733 19.1x 32.2x 24.8x 4.8x

Lincoln Electric LECO $86.73 6,021 17.6x 22.1x 16.5x 2.5x

Roper Technologies ROP $268.01 28,778 21.4x 29.9x 22.4x 6.3x

Peer Average $124.27 13,139 18.2x 28.0x 21.3x 4.5x

Premium/(Discount) vs. Peers 8.5% (39.7%) (15.4%) (4.1%) (10.9%) (14.3%)

Median $110.77 9,325 18.0x 28.4x 22.4x 4.5x

Source: FactSet, Yahoo Finance

Peer Group: Comps FY17

Company EBITDA FCF Gross Margin Gross Margin ROA ROE

Nordson 27.4% 13.5% 55.1% 55.1% 10.1% 29.5%

AMETEK 25.9% 17.6% 37.1% 37.1% 9.1% 18.7%

Graco 28.3% 20.2% 53.8% 53.8% 19.3% 38.9%

IDEX 25.7% 17.0% 48.2% 48.2% 10.3% 19.7%

Lincoln Electric 14.6% 10.8% 34.3% 34.3% 13.0% 32.6%

Roper Technologies33.7% 25.7% 62.2% 62.2% 6.8% 15.4%

Average 25.9% 17.5% 48.5% 48.5% 11.4% 25.8%

vs. Peers 5.7% (22.7%) 13.7% 13.7% (11.7%) 14.3%

Median 26.7% 17.3% 51.0% 51.0% 10.2% 24.6%

Source: Company's Guidance, FactSet

Peer Group: Margins & Returns FY17



Business Breakdown

Nordson Corporation engineers, manufactures and

markets customized and differentiated products and

systems that are used to dispense and apply a

controlled amount of adhesives, coatings, sealants,

biomaterials, polymers and other fluids. The company

also produces systems used to test and inspect for

quality and to treat and cure surfaces. Through these

products and services, it taps into multiple markets

and industries that diversify industry and market

specific risks. Constant innovation in the technology

sector and Nordson’s increasing investment in

Research and Development allows the company to

experience recurring revenues from parts and

consumables to form 47% of Nordson’s total revenues.

Nordson’s production operations include machining,

molding, and assembly. It manufactures specially

designed parts and assembly components into finished

equipment. This niche secures Nordson’s recurring

stream of revenue as technological innovation prompts

customers to periodically change parts and

components of their machinery instead of replacing

the whole unit.

Nordson Corporation operates through three major

operating segments - Adhesive Dispensing Systems,

Advanced Technology Systems and Industrial Coating

Systems contributing 44.3%, 43.4%, and 12.3% to total revenue in 2017.

The Adhesive Dispensing Systems segment formed 44% of Nordson’s $2.1 billion revenue in FY2017. This

segment represents Nordson’s cutting-edge precision dispensing and processing technology to diverse

markets like the medical, electronics, and automobile industry, to name a few.

The Advanced Technology Systems is the company’s fastest-growing segment that formed 44% of Nordson’s

total revenue in FY2017, and under this segment, the company produces electronic systems, fluid

management systems, and test, and inspection systems.

The Industrial Coating Systems segment formed 12% of the company’s revenues in FY2017. It provides

standard and customized equipment used in the application of paint, coatings, finishes, and sealants and the

drying and curing of the dispensed material.

PCB Assembly10%

Semiconductors5%

Electronic components

10%

Medical13%

Automotives9%

Industrial11%

Consumer Durables

10%

Consumer Non-

Durables32%

Diverse End Markets

Engineered systems

18%

Standard Product

35%

Parts & Consumerables

47%

Product Type (2017)



Mega Trends (Detailed)

The Adhesive Dispensing Systems is expected to achieve organic growth of 1.5 to 2 times that of global GDP

due to the increased use of disposable hygiene products, increased use of packaged convenience foods, and

increased use of plastics.

➢ The disposable hygiene products market is expected to grow significantly due to increased consumer

spending due to increase in disposable income, increasing concerns for safety, convenience, and

hygiene, and increasing penetration in developing countries like India and China.

➢ Growing demand for ready-to-eat meals, frozen foods, and dried processed food is expected to drive

the industry growth. The recent shift to flexible packaging and the expected 2.9% CAGR growth in the

market will further boost Nordson’s sales during the forecasted period.

The Advanced Technology Systems segment is expected to achieve an organic growth of 2 to 3 times that of

global GDP due to the growing mobile computing industry, rapidly evolving minimally invasive medical

technology, and the increasing demand for semiconductors, circuit shrinkage, and flexible circuit demand.

➢ The minimally invasive technology market is expected to grow at a CAGR of 11.3% to 2024 and the

aging population is expected to grow significantly with 1.045 billion people expected to fall in the age

group of 60 years and above. These trends will increase the sales for Nordson’s minimally invasive

catheters and fluid management systems.

➢ The semiconductor industry is expected to grow at a CAGR of 5.11% over the period of 2015-2020 with

the global semiconductor packaging market growing with a CAGR of 15.7% during the same period.

The growing e-sports industry and the resulting demand for advanced graphics chips will contribute to

growth in Nordson’s packaging and adhesive dispensing systems.

➢ The increase in demand for wearable electronics and smart devices is rapidly increasing the need for

flexible packaging and printed circuit board assembly will drive the advanced technology systems

segment substantially.

The Industrial Coating Systems segment is expected to grow organically at a rate greater that the global GDP

growth rate due to the growing aerospace industry, and increased focus on light-weighting of vehicles.

➢ The aerospace coating market is expected to reach $2433 million by 2023 through a CAGR of 6.3%.

Moreover, the need for regular maintenance of aircrafts and the benefits of light-weighting will

continue to drive this demand. An increased defense spending acts as a subordinate tailwind to this

growth.



Macro Trends (Detailed)

Aging Population

Globally, population aged 60 or

over is growing faster than all

younger age groups. In 2017,

there are an estimated 962

million people aged 60 or above is

growing at a rate of about 3% per

year. Currently, Europe has the

greatest percentage of the

population aged 60 or over,

roughly at 25%. The number of

older persons in the world is

projected to be approximately

1.4 billion in 2030 and 2.1 billion in 2050.

Global GDP

According to data from the World

Bank, Global GDP from 2016 to

2022 is increasing at a low but

stable percentage and then

expects to see a slight easing in

2020 and remain at the 2.9%

through 2022.

962

991

1021

1051

1083

1115

850

900

950

1000

1050

1100

1150

2017 2018 2019 2020 2021 2022

Global Population >60(Millions)



Consumer Spending in Emerging Markets

Over the next five years, consumer spending in emerging markets is expected to grow three times faster than

in developed nations, reaching a total of $6 trillion by 2020. Despite concerns of near-term slowing over the

next 20 years, emerging markets are expected to contribute more than 70% of global GDP growth, with

emerging markets consumer spending growing to $30 trillion annually - representing nearly half of all global

spending.



Risks

1) Currency exchange rates

Nordson has a direct presence in over 35 countries worldwide, and this leaves it exposed to unpredictable

fluctuations in foreign currency exchange rates, particularly with respect to the Euro, the Japanese Yen,

the Chinese Yuan, and the Great British Pound. In case of a notable change in the value of the currencies,

from the countries that conduct business with Nordson against the US dollar, can harm the company’s

financial results. A drastic change could diminish the company’s ability to effectively sell its products in the

competitive market and fail to provide an accurate picture of the company’s financial situation and result

of operations.

2) Failure to create consumer-preferred and technologically relevant products

In an ever-evolving industrial sector, Nordson maintains its market share through continuous innovation

that allows it to capture emerging markets and keep pace with the changing consumer and market

preferences. Nordson focuses on maintaining its position as a leading provider of precision technology

solutions for the industrial equipment market. However, it is vulnerable to unpredictable delays and

difficulties in research, development, and production of new products. Moreover, the company also faces

the risk of a possible lack of acceptance of new products and technologies which can drastically affect its

sales and competitive position in the market.

3) Political relations between countries

Nordson Corporation conducts its operations including manufacturing, sales, and distribution all over the

world. This exposes the company to risks related to conducting business outside the United States.

International operations are subject to economic and governmental instability, taxation policies, labor and

political disturbances, and exchange and trade restrictions. Such events can disrupt operations and reduce

demand for the company’s products and services. Thus, harming it’s operating and financial performance.

Stable international operations depend on favorable trade relations between the U.S. and foreign

countries.

4) Safety of intellectual property

Nordson technologies depend on its proprietary products and trademarks to maintain its competitive edge

in the industry. Its innovative products and technologies ensure long-term growth and a consistent market

share. However, like any other company with propriety products, Nordson is exposed to the risk of

misappropriation of trademark technology. A third party could copy or obtain and use Nordson’s product

without authorization. This can be a severe threat to the company’s financial performance and can lead to

a diversion of its efforts due to resulting litigation. To safeguard its technological innovation, Nordson

relies on a combination of patents, copyright, trademark and patent laws, and third-party non-disclosure

agreements.



Supplementary Data

Revenue Drivers & Margin Considerations

Adhesive Dispensing Systems

The Adhesive Dispensing Systems segment formed

44% of Nordson’s $2.1 billion revenue in FY2017.

This segment represents Nordson’s cutting-edge

precision dispensing and processing technology to

diverse markets like the medical, electronics, and

automobile industry, to name a few. The segment

focusses explicitly on nonwovens, packaging,

polymer processing, and product assembly. Most of

its applications focus on optimizing the use of

adhesives and improving bonding and sealing

performance through its products. Moreover, the

systems also focus on reducing material

consumption, increasing line efficiency, and enhancing product strength, durability, appearance, and brand.

Advanced Technology Systems

The Advanced Technology Systems is the company’s fastest-growing segment that formed 44% of Nordson’s

total revenue in FY2017, and Under this segment, the company produces electronic systems, fluid

management systems, and test, and inspection systems. The products focus on processes such as surface

treatment, accurately controlled automated, semi-automated or manual dispensing of material, bond testing,

and optical and X-ray inspection to ensure quality. These systems are more customized to specifically serve

the needs of the medical, electronics and related high-tech industries.

Industrial Coating Systems

The Industrial Coating Systems segment formed 12% of the company’s revenues in FY2017. It provides

standard and customized equipment used in the application of paint, coatings, finishes, and sealants and the

drying and curing of the dispensed material. This segment primarily serves the consumer durables market that

forms 10% of the total markets covered by the company. The ICS segment is comprised of several smaller

businesses. Roughly 40% of the business provides equipment that dispenses powder coating onto durable

goods (i.e., appliances, patio furniture, grills, bike frames). Approximately 25% of the business is its cold

materials business – which is similar to the ADS segment except the equipment dispenses ambient

temperature materials (vs. hot melts for ADS) and is better suited for stronger bonding capabilities. The

remaining businesses include liquid painting, container coating, and UV Curing. Looking at the portfolio of

businesses, cold materials and container coating appear to be the most attractive businesses from a market

position and margin standpoint.

44%

44%

12%

Operating Segments (2017)

Adhesive Dsipensing Advanced Technology

Industrial Coating



Geographic Exposure (Clients and Suppliers)

Nordson Corporation drives a significant amount

of its organic growth by introducing new and

innovative products and capturing rapidly

expanding opportunities in emerging geographies.

Additional growth is also acquired through

acquisitions of companies that serve international

growth markets. Because of the company’s

strategically planned growth structure, it has

successfully achieved direct presence in over 35

countries in FY2017. In 2017, nearly 70% of

Nordson’ total revenues were sourced outside the

United States. The top three contributors of revenue were USA (31%), Asia Pacific (29%), and Europe (26%).

However, it is important to note that no single customer accounted for 10% or more of sales. Nordson’s

individual customer base spans over multiple sectors and industries with 30% of the revenues contributed by

the consumer non-durables industry. Such a consumer base which is spread across countries and markets

significantly reduces Nordson’s vulnerability to country-specific or industry-specific risks.

Nordson relies on external suppliers for raw materials used to manufacture specially designed parts and

assembly components. To reduce its reliance on a single supplier or client and the risk that comes along with

it, Nordson is not reliant on a lone supplier for any of its materials and no single client consisting of more than

10% of revenues. Through a competitive selection based on service, quality, and cost, Nordson ensures

availability of multiple sources for all its raw materials

Segments (Detailed)

Adhesive Dispensing Systems

Nordson’s Adhesive Dispensing Systems segment manufactures and distributes products to melt, filter, pump,

transport, dispense, and deposit adhesives, polymers and other materials in the manufacturing of wide range

of products. It is an industry leader in recession-resistant, consumer non-durable end markets. In 2017, the

Adhesive Dispensing Systems achieved worldwide sales of $916 million. This revenue was a result of an

increase in sales in all geographic regions except Europe. Nordson controls a dominant (>70%) market share

position in the sale of core hot melt adhesive dispensing systems used in the packaging, nonwovens, and

general product assembly end markets. It also has a leadership position in polymer (plastic) processing with

market share >20%, though this business is relatively new for Nordson. With its product portfolio now

complete, management believes it can execute a similar combination of technological superiority and boots

on the ground service through a technically trained sales force to drive market share steadily towards its

legacy businesses.

29%

7%

26%

7%

31%

International Exposure

Asia Pacific Japan Europe Americas USA



Growth in product lines serving rigid & flexible packaging, consumer non-durables, disposable hygiene and

general product assembly end markets resulted in an increase in sales of 4.1% from 2016. The segment has a

2012-17 sales CAGR of 6.0% and a 2012-17 average annual operating margin of 26.6%.

The current trend shows that

Nordson’s customers are

increasingly demanding products

that can dispense smaller quantities

in tighter and more difficult to reach

spaces and hence, the company

now plans to focus on attaining such

sophistication as a solution provider

through innovation. The global

dispensing systems market is

expected to grow at a CAGR of 5.1% to 2020 including the automated medication dispensing market which is

expected to grow at a CAGR of 7.0% during the same period. Nordson stands to benefit from this growth that

is supported by the positive trends in the use of disposable hygiene products, packaged convenience foods,

and plastics.

Advanced Technology Systems

Nordson’s Advanced Technology Systems segment manufactures precision dispensing, fluid management,

test, inspection, and surface treatment products for medical, electronics, and general industrial markets. It is

considered an industry leader for these products in the rapidly growing electronics, medical and related

markets. In 2017, the Advanced Technology Systems segment accounted for worldwide sales of $897 million.

This sales increase of 32.7% from 2016, consisted of 15.1% organic and 18.3% acquisition-driven growth. The

segment has a 2012-17 sales CAGR of 11.7% and a 2012-17 average annual operating margin of 24.1%.

The current trend shows that the industrial equipment industry is increasingly moving towards flexible and

small packaging and X-ray based inspection which provided a strong boost to the demand for Nordson’s

related products. The company is positioned to benefit from the growing demand for mobile computing,

circuit shrinkage, medical devices, and solar-powered devices.

Industrial Coating Systems

Nordson’s works with manufacturers to provide equipment for the precise application and curing of powder

coatings, liquid paint, food and beverage container production, and ambient temperature adhesives and

sealants. In 2017, this segment gained a total revenue of $253 million after a sales volume increase of 0.8%.

This increase was driven by demand for liquid and UV curing, powder coating and container product lines

serving industrial end markets. The segment has a 2012-2017 sales CAGR of 3.9% and 2012-2017 average

0

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4000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

North America Automated Dispensing Market ($mm)



annual operating margin of 15.5%. Nordson targets an organic growth of at least 2 times the global GDP for

this segment in 2018. The company aims to focus the growth in lean manufacturing, emerging markets like

aerospace, and light-weighting of vehicles to drive growth in this industry.

Future Drivers & Catalysts

Semiconductors Packaging

The global semiconductor packaging market is expected to grow at a CAGR of 5.11% over the period of 2015-

2020. A growing focus on 3D stacking creates a strong growth opportunity for Nordson to accelerate margins

in Advanced Technology Segment. Global 3D semiconductor packaging market size is estimated to reach $8.9

billion by 2022, growing at a CAGR of 15.7 % from 2016 to 2022.

Internet of Things (IoT) is also expected to have a significant impact on the advanced semiconductor packaging

market. Hence, new packaging technologies supporting IoT driven semiconductor industry are being

introduced. An imminent requirement for size reduction in electronic devices, improved efficiency, and less

power consumption drive the adoption of 3D semiconductor packaging in microelectronic devices and

consequently navigates the growth in 3D semiconductor packaging industry. Its advantages over other

packaging technologies, lower cost, smaller size, and enhanced efficiency will drive this growth. With Nordson

semiconductor manufacturing equipment, including bond testers, dual dispensers, and UV curing ovens,

customers can create packaging to protect against impact and corrosion. Additionally, Nordson’s wafer

processing equipment will help you find efficiencies in cleaning and etching wafers.

Overall, miniaturization of devices and thermal dissipation are leading towards the growth of the advanced

semiconductor packaging market. Meanwhile, the requirement for less power consumption, improved

efficiency is driving the adoption of 3D packaging in the advanced semiconductor packaging market.

Additionally, a macro trend our analysis has

discovered which benefits this segment is the

electronic sports. The E-Sports industry is

currently hovering above 1.5 billion and is

expected to reach nearly 2.5 Billion by 2022.

Hence, increased demand for advanced and

miniaturized graphics chips will drive the

demand for Nordson’s adhesive dispensing,

inspection, and flexible packaging systems.

0

1

2

3

2017 2018 2019 2020 2021 2022

Worldwide Esports Revenue (Billions)



Aerospace Industry

Global Aerospace Coatings Market was

valued at $1,587 million in 2016 and is

expected to garner $2,433 million by

2023, registering a CAGR of 6.3%

during the forecast period 2017 - 2023.

Aircrafts are subjected to high climatic

stress that causes wear & tear of metal

surfaces, which results in frequent

maintenance and repair. Aerospace

coatings offer high resistance against

corrosion, solar heat & ultra violet rays,

fog, and other adverse weather conditions. Along with high protection, it also reduces the weight of aircrafts,

and thus helps reduce CO2 emissions. Increase in number of aircrafts due to growth of aviation industry in the

emerging markets such as China, and India is expected to propel the demand for aerospace coatings. Airline

mergers are of significant interest for aerospace coatings manufacturers, which is expected to fuel the growth

of aerospace coatings market during the forecast period.

Commercial aviation is the most lucrative market for aerospace coatings and is expected, to grow at the

significant CAGR during the forecast period. Rise in number of air travelers, increase in cargo traffic, and

growth in international trade has led to the development of commercial aviation industry, which fuels the

market. Military aviation is the second most attractive market for Nordson due to the increase in investment

in military & defense sector in countries such as U.S., Mexico, China, India, and Russia.

Nordson Aerospace Applications

From wings and spars to external doors and overhead compartments, Nordson’s technology plays a crucial

part in aerospace manufacturing. Nordson’s applications include:

Aerospace Materials Manufacturing - Improve quality

and simplify production when manufacturing

compressible or difficult to mix sealant materials

Cartridge Dispensing - Reduce aircraft weight and

increase production speed with the automated

application of sealant from pre-mixed cartridges

Composite Material Edge Sealing - Automated

application of two-component epoxies used to seal

unfinished edges of fiber-reinforced aerospace

composite structures. Solvent Based Coatings Water Based Coatings

Powder Coatings Others

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2017 2018 2019 2020 2021 2022 2023

Global aerospace coatings market by 2023 to reach $2.4 billion by 2023



Mix-On-Demand Dispensing - Reduce material handling complexities and prevent material damage

by dynamically mixing wide ratio, syntactic two component materials at point of application

Nordson is one of the world’s largest manufacturers of equipment used to precisely apply and cure paint,

powder coatings, adhesives, and sealants in a wide range of aerospace applications. Growth in this industry is

expected to benefit these applications significantly through increased demand for sealing and dispensing

products. The rise in defense spending will further lead to increased revenue.

Consumer Non-Durables

Rigid and Flexible Packaging

Rigid Packaging

The rigid packaging industry is expected to witness a growing demand from emerging economies such as

China and India. Growing end-use industries such as food & beverages, pharmaceuticals, and personal care in

these countries are expected to be major drivers of the market in this region. The global rigid packaging

market size was valued at USD 472.19 billion in 2015. Growing demand for packaged food such as ready-to-eat

meals, frozen foods, and dried processed foods is expected to further drive industry growth.

The packaging industry is increasingly moving towards flexible packaging and Nordson plans to focus its efforts

to benefit from this emerging market.

Flexible Packaging

The Flexible Packaging industry had 31.3

Billion in sales in the United States in 2014. It

is the second largest segment in the U.S.

garnering about 19% of the U.S. $164 Billion

packaging market. The largest market for

flexible packaging is food (retail and

institutional), accounting for about 60 percent

of shipments. Other markets for flexible

packaging include retail non-food at 12

percent; industrial applications at 6 percent;

consumer products at 10 percent;

institutional non-food at 3 percent, and

medical and pharmaceutical at 9 percent.

32%

31%

27%

10%

Global Flexible Packaging Market Revenue by Geography as of 2016

Asia Pacific America Europe Others

http://www.nordson.com/sitecore/service/notfound.aspx?item=web%3a%7bC8350CED-77AE-48A1-A9C3-72B303A5084F%7d%40en

http://www.grandviewresearch.com/industry-analysis/frozen-food-market



Future drivers in the packaging segment

Firstly, Nordson’s Industrial packing and packaging solutions include:

➢ Hot melt adhesive dispensing systems which includes paper-based and rigid packaging. Nordson’s

packing equipment includes equipment that manages sealing, attachment, confectionary and small

packs, tray making, labeling and palletizing.

➢ Polymer processing, extrusion and laminating components for flexible industrial packaging including

pouches, wraps, films, and coated papers.

The growing flexible packaging market

will help Nordson pump through more

plastic-based flexible packaging

increasing that part of the segment

with at least 2x GDP especially with

stronger export growth to emerging

markets and clients requiring more

and wanting to pay less. Flexible

packaging offers a powerful solution

that will have a cost benefit from the

manufacturer (NDSN) to institutional

clients to individual consumers.

Secondly, the impending consolidation in NDSN’s polymer plants is aimed at supporting sturdy growth and

margins. NDSN will be adding advanced engineering and manufacturing systems, a new warehouse and

inventory system, a dedicated aftermarket section, and an expanded technology center. Some emerging

markets Nordson is responsible for in the polymer products business include Europe, the Middle East, Africa

and a growing China. Not only will this demand in polymer products increase margins, but it will also help

increase support for customers throughout the world by expanding their capabilities in manufacturing,

processing trails, startup assistance, technical service, spare parts, and refurbishment of all Nordson melt

processing equipment.

The Asia Pacific is expected to experience the highest demand for flexible packaging. Escalating demand for

pharmaceutical products, packaged food, and retail non-products along with changing consumption habits

and altering lifestyles will lead to this growth in the Asia Pacific market that forms 29% of Nordson’s consumer

base.



Disposable Hygiene Products Market

The disposable hygiene products market is witnessing an annual growth of nearly 607% due to increased

consumer spending on personal care products globally benefitting Nordson because of a growing middle class

in emerging markets globally. In addition, the demand for improvised comfort, performance, and efficient

absorbent hygiene products is expected to drive demand for disposable hygiene products in the near future.

Concerns for safety, convenience and hygiene are identified as key factors affecting growth of disposable

hygiene products market.

Furthermore, rising consumption of products such as sanitary pads, wipes, and baby products across the globe

is anticipated to drive demand for disposable hygiene products market in near future. Among the developing

economies, increasing population and manufacture of such products in countries such as India and China and

low penetration of these products is expected to open opportunities for growth of the market for Nordson.

Moreover, industry-sophistication is expected to fuel the demand for disposable hygiene products in Brazil.

Economic development particularly in countries such as China and India is a key factor contributing towards

substantial growth of disposable hygiene products market in the region.

Overall, increasing disposable income, rising expenditure or consumer spending on personal hygiene and

increasing hygiene concerns are expected to fuel demand for disposable hygiene products over the next 3 to 5

years.

Mobile Computing, Internet of Things

Industry Market research forecasts the global mobile computer market share to grow moderately at a CAGR of

more than 4% by 2020. Key factors driving this growth is the increased internet penetration and the growing

utilization of devices like tablets, smartphones, laptops, and notebooks. Especially with a strong rise in lower

end mobile tablets in elementary and middle schools substituted for hard copy books. It is important to note

that the augmented demand for mobile computers in small businesses and point-of-sale systems have been

adopting at a higher rate than in previous years.

Global fluid dispensing systems market is expected to reach USD 55.09 billion by 2024. Growing electronic

components manufacturing in Southeast Asia is expected to drive this growth. The trend towards

miniaturization of electronic components and industry automation are key growth driving factors for the

global fluid dispensing systems market. Recent innovations aimed at improving production processes due

to high consumer demand and gradually reducing turn-around times have led to manufacturers adopting

automated systems for applying adhesives, sealants, coatings, and lubricants during their processes.

Adhesives & sealants and lubricants dominated dispensing system types and accounted for nearly 60% of

the global revenue in 2015. Lubricant dispensers have been gaining wide spread popularity owing to their

diverse applications in automotive, electrical & electronics, construction.

Electrical & electronics applications promise high growth opportunities for fluid dispensing systems with

their usage in printed circuit boards and semiconductor packaging as well.

https://www.grandviewresearch.com/industry-analysis/fluid-dispensing-systems-market



This directly links to our analysis on

Nordson because each component

used in manufacturing smartphones,

tablets, wearables, and other

devices has a diverse set of

requirements for fluid handling,

placement, and application.

Nordson’s precision fluid dispensing

systems deliver the accuracy,

consistency, and speed required to

meet consumer demand for thinner,

lighter, and more sophisticated

Internet-Connect devices at a lower

price.

Medical equipment

Nordson’s Medical segment, which formed 13% of its total revenues, designs, manufactures and distributes

medical products including medical tubing, fluid management components, biomaterial delivery devices,

catheters, cannulae, and complex nitinol components. This segment stands to benefit from the medical

sector’s move towards minimally invasive technology with the market growing at a CAGR of 11.3% into 2024.

The world population is estimated to be 7.758 billion by 2020 with 1.045 billion people in the age group of 60

years and above while the number of people aged 85 and above is expected to be 6.6 million by 2020. This

changing demographic plus an increasing aging population will aid Nordson’s medical devices segment

significantly.

Medical Electronics and Device Manufacturing Sub-Segment

The global automated dispensing machines market was valued at USD 2.9 billion in 2015 and is projected to

grow at a lucrative CAGR of over 7% over the forecast period of 7 years towards 2022. Growing government

initiatives to support healthcare institutes and pharmacists with the deployment of technologically advanced

medication dispensing system to reduce medication errors is expected to boost the usage rate during the

forecast period.

Fluid Dispensing Equipment Market in millions (U.S. only)



Medical Disposables

The medical industry uses nonwoven products as a

sterile solution to reduce infections and not only

does the structure of nonwoven material provide a

protective barrier, but protection can be enhanced

by an antimicrobial surface treatment.

Surgical/medical garments should also be well-

fitted, lightweight and allow for freedom of

movement. Use of precise Nordson material

dispensing systems supports the stretch, hand and

thinner/lighter substrates to meet the growing

industry needs for safe and convenient medical

disposables.

The global medical disposable market is expected to reach USD 329.9 billion by 2024. The propelling factors of

this sector comprise of constantly rising hospital visits, surgeries, and the growing need for healthcare

assistance owing to the escalating geriatric population.

In addition, rising demand for minimally invasive surgeries is spurring the demand for needles and drug

delivery devices, which is resulting in the high revenue generation of the segment. With the introduction of

advanced technology and growing demand for accurate diagnostic methods, the diagnostic and laboratory

disposables segment are expected to show the second fastest growth during the forecast period.

Growing economies and government-led initiatives are expected to drive the growth of the medical

disposables sector in the Asia Pacific region. The segment is expected to witness a lucrative CAGR of over 7%

during the forecast period.

47%

33%

20%

Global Medical Disposable Market Geographical Segmentation by

revenue (Billions)

Americas EMEA APAC



Automation

Industrial Automation Market

The global industrial automation market is anticipated to reach a valuation of US$352.02 billion by the end of

2024 from US$182.64 billion in 2015. Between the forecast years of 2016 and 2024, the global market is

expected to expand at a CAGR of 6.6%. The overall robotics market is expected to increase with a CAGR of

more than 9% and the growth in Industrial

sector is expected to be the biggest

contributor of this growth.

In terms of geography, the global market is

segmented into North America, South

America, Asia Pacific, Europe, the Middle

East and Africa, and rest of Latin America. Of

these, Europe is anticipated to lead the

global market in the coming years. By the

end of 2024, the Europe industrial

automation market is projected to acquire a

share of 29.9% in the global market.

Nordson has a strong presence in this region and is focused on its polymer and manufacturing plant

consolidation to meet the growth and demand while reducing operational efficiencies which will impact net

operating margins in an accretive way driving the number from 27 to slightly over 30%.

The global industrial automation market is expected to witness a significant spike in the coming years as the

manufacturing industry is on the cusp of revolutionizing its operations. The introduction of modern

technologies that permits manufacturing industries to speed up their processes and ensure utmost efficiency

are expected propel the growth of the overall market. Analysts project that industrial automation is expected

to witness substantial growth in areas of automotive and transportation paper industries

Automotive

In 2017, Auto electronics formed 15% of the total Advanced Technology systems. The global electric vehicles

market is estimated to grow in volume at a CAGR of 38.3% from 2017 to 2026 with the automated guided

vehicle market expected to reach $2.68 billion by 2022. With the automotive industry moving towards smaller,

more efficient and compact vehicles, Nordson is expected to benefit through an increase in demand for its

testing and inspection products. In an attempt to align with this trend, Nordson recently acquired Sonoscan

which allows the firm to broaden its non-destructing test and inspection capabilities.

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2000 2005 2010 2015 2020E 2025E

Worldwide Spending on Robotics is expected to reach $67 billion by 2025

Industry

Commercial

Military

Personal



PCB Assembly

The Printed Circuit Board (PCB) assembly market formed 10% of Nordson’s total revenues in 2017. Nordson’s

ASYMTEK that focuses on PCB assembly offers precise dispensing, jetting, and conformal coating solutions that

makes Nordson the industry leader at every point in the evolution of fluid dispensing for PCB assembly. The

North American PCB market saw a 39% year of year increase in bookings in the last quarter of 2017 leading to

an increase in backlog for the year 2018. The rise in the demand for smart consumer devices with smaller,

more tightly packed PCB is expected to

drive the demand for the market. The

miniaturization of components as well as

the increasing demand for wearable

technology will benefit the PCB market

in the coming years. The wearable

technology market is expected to grow

into a $160 billion market by 2028 and

the growth of the automotive sector

with a predicted CAGR of 6% over 2017-

2021; both these markets are expected

to push the PCB assembly growth

exponentially. The industry is increasingly moving towards stretchy PCB boards especially for wearable

electronics and this will further increase the market size to $27 billion with a CAGR of 10.6% through 2024.

Newly innovated 3D printing of PCB’s will allow the market to match the rapidly growing demand successfully.

Overall, Nordson is expected to substantially benefit from the shift to machine assembly, and the rapidly

increasing demand for flexible PCB board, virtual and augmented reality, and wearable smart devices.

Organic and Acquisition-Driven Growth

Nordson Corporation achieves organic growth by introducing new products and technology, providing high

levels of customer service, leveraging existing technology into new applications, and capturing rapidly

expanding opportunities in newly emerging markets and geographies. Capital Allocation is used to support this

organic growth. New and innovative applications that are expected to drive organic growth include sensor

assembly, LED assembly, wearable electronics, micro-materials testing, aerospace assembly, and minimally

invasive catheters. Moreover, the company also attains additional growth through the acquisition of small

companies on the frontier of technological innovation. It acquires companies that serve international growth

markets, share similar business model characteristics, and have the ability to leverage Nordson’s global

infrastructure. In FY2017, the total sales volume increase consisted of 7.9% from organic growth, and 6.9%

from acquisitions. Acquisition related dilution generally results in a less than 5% decrease in operating margins

for the company. As of 2017, Nordson has achieved a Return on Invested Capital of 14%.

0

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15

20

25

30

35

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Global Flexible Printed Circuit Board Market Size in billions



The Acquisition Effect

Nordson’s acquisitions are

focused on the addition of both

capacity and capability to

company’s expansion. The

company emphasizes on a

combination of continuous

improvement activity, increasing

levels of upgrading, and

automation to increase

efficiency. A Nordson-acquired

company is a strategic fit to the

parent, a strong industry performer, has a high percentage of recurring revenue, and a growth rate that is

equal to or higher that of Nordson Corporation. The acquired company either allows Nordson to enter a new

industry or provides it exclusive excess to new and innovative technology in the industrials sector.

An example of Nordson’s ideal acquisition is Sonoscan, Inc. In January 2018, Nordson Corporation acquired

Sonoscan, Inc., an Illinois-based designer and manufacturer of acoustic microscopes and sophisticated acoustic

micro imaging systems that are used in a variety of automotive, aerospace, microelectronic, and industrial

electronics assembly applications. Nordson acquired Sonoscan to broaden its test and inspection capabilities

for the electronics markets. Nordson aims to grow its Electronics Systems business in the advanced semi-

conductor packaging and automotive electronics markets. It was announced that this acquisition transaction

was not material to Nordson Corporation.

0%

5%

10%

15%

20%

25%

30%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

The Acquisition EffectDilutive effect



Strategic Acquisition History and Impact

Value Plastics

Value Plastics, a Nordson Company, manufactures and markets an innovative line of fluid management

components designed specifically for flexible tubing. Value Plastics products find global application in

demanding healthcare OEM, research and specialty industrial applications. Value Plastics has generated

outstanding growth over an extended period by providing differentiated, single-use, precision molded plastic

components that are delivered through a highly efficient sales process and supported by exceptional customer

service. This model represents the same highly successful approach that NDSN employs within their Nordson

Engineered Fluid Dispensing (EFD) product line. Value Plastics supports Nordson’s strategic objective of

building upon our medical and life sciences platform and complements our existing growing positions in

biomaterial delivery devices and medical device assembly. The $250 million purchase price was financed with

availability under an existing $400 million revolving credit facility. The transaction was accretive to Nordson’s

earnings in the first full year of acquisition. Additionally, the Value Plastics acquisition expanded Nordson’s

medical offering with a more robust geographic reach. The company’s single-use fluid connection components

are critical to applications including anesthesia, cardiovascular surgery, cataract surgery, and blood

management. Nordson witnessed multiple new geographic and industrial opportunities to accelerate Value

plastics’ strong record of double digit growth, and several soon to be introduced products will significantly

expand their addressable market. In 2011, this acquisition was accretive by increasing Advanced Tech Systems

Sales from 2010 to 2011 by 3% and by 4% in 2012.

Company Sales EBITDA Sales EBITDA ADS ATS ICS

Vention Medical 4/3/2017 705 150 48 4.7x 14.7x x

Plas-Pak Industries 2/1/2017 71 28 8 2.5x 9.4x x

InterSelect GmbH 2/15/2017 5 12 2 1.6x 10.7x

Ace Production Technologies 1/6/2017 14

LinkTech 9/1/2016 43 4 x

Matrix 9/1/2015 54 5 x

WAFO 8/3/2015 7 1 x

Liquidyn 5/15/2015 15 1 x

Dima Group 5/29/2014 6 1 x

Avalon Labs 8/8/2014 180 34 16 5.3x 11.0x x

Nellcor Assets 9/27/2013 6 1 x

Kreyenborg 8/30/2013 170 80 14 2.1x 12.1x x

Kordama 11/8/2012 1 0 x

Sealan Equpt & Eng. 8/1/2012 44 4 x

EDI Holdings 5/14/2012 200 80 21 2.5x 9.6x x

Xaloy 5/21/2012 200 114 20 1.8x 10.0x x

Value Plastics 5/25/2011 258 27 15 9.6x 16.9x x

Verbuggen 5/30/2011 13 10 1 1.3x x

Micromedics 11/1/2010 21 2 x

Total Since 2010 2,014 165 12.2x

Source: Company Fillings

Pre-Synergy

Segment

M&A Date Purchase ($mm)

Historical Acquisition Activity

Multiples($mm)



Vention Medical

Vention Medical Advanced Technologies is a leading designer, developer and manufacturer of minimally

invasive interventional delivery devices, catheters and advanced components for the global medical

technology market. Nordson’s Medical product portfolio continued to grow organically at a high rate, and

Nordson doubled the size of this business with the acquisition of Vention Medical. This highly complementary

addition enhances Nordson’s strategic capabilities, expands relationships with multiple blue chip medical

technology customers, and is accretive to the firm’s margins.

Nordson acquired Vention for an aggregate purchase price of $705 Million excluding cash. The acquisition was

funded primarily through a new term loan facility, as well as through cash and borrowings on Nordson’s credit

facility. The purchase price was allocated to the underlying assets acquired and liabilities assumed based upon

their estimated fair values at the date of acquisition. Vention represented 6 percent of Nordson’s consolidated

net sales and 4 percent of its net income for 2017.

Backlog

Nordson recognizes revenues upon shipment.

As of October 31, 2017, the company’s backlog

increased to $402 million from $278 million

last year. This growth is primarily a result of

growth within the Advanced Technology

Systems segment. All the current backlog is

expected to be shipped by the end of 2018 as it

has done historically, it will continue with the

status quo if not expedited sooner because of

the removal of redundancy and operational

inefficiencies scheduled to be completed by the end of FY 2018.

Recurring Revenue

Nordson Corporation enjoys a strong and consistent

stream of recurring revenue through parts and

consumables due to constant innovation in the

market and the need for manufacturers remain to

technologically current in terms of machinery.

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2010 2011 2012 2013 2014 2015 2016 2017

Backlog ($mm)



ELROI DCF Valuation

Implementing our analyzed projections with the ELROI DCF Valuation, you will notice the numbers selected for

the forecasting period were derived from our own analysis with a holistic average of five forecasted years

from our Pro-Forma Statements. After inputting our projected figures, we discovered ELROI’s implied return of

32.5% is slightly above our base case scenario of 25%.

Ticker: NDSN

Ticker:NDSN 12 months

CompanyName:NORDSON CORP Ending Projection

Date: 10/17 Type 1Year 3Year 5Year 1 2 3 4 5 6

Revenues 2067 Growth 14.26% 6.65% 7.96% Select 8.00% 2232.36 2410.95 2603.82 2812.13 3037.1 3280.07

COGS 834

Gross Profit 1233 Margin 59.67% 58.82% 59.02% Select 56.00% 1250.12 1350.13 1458.14 1574.79 1700.78 1836.84

Gross Margin 60% Change 87bps 71bps -189bps

EBITDA 548 Margin 26.50% 24.89% 24.88% Select 28.00% 625.06 675.07 729.07 787.4 850.39 918.42

EBITDA Margin 26% Change 106bps 142bps -20bps

EBITDA per Share $9.52 Growth 18.07% 12.36% 10.26% $10.78 $11.65 $12.58 $13.58 $14.67 $15.84

Depreciation 91

Interest Expense 37

PreTax Income 420 Margin 20.33% 19.51% 19.87%

Growth 14.06% 6.04% 5.20%

Earnings Before Interest and Taxes (EBIT) 457

Tax Rate (t) 29.62% Average 29.62% 28.56% 28.88%

EBIT*(1-t) 322 Margin 15.56% 14.90% 14.97% Select 24.00% 535.77 578.63 624.92 674.91 728.9 787.22

EBIT*(1-t) Per Share $5.55 Growth 11.82% 7.72% 6.70% $9.24 $9.98 $10.78 $11.64 $12.57 $13.58

+Depreciation 91 Depr/Capx Ratio 126.96% 115.83% 119.98% Select 65.00% 36.28 39.18 42.32 45.7 49.35 53.3

-Capital Expenditures 72 as % sales -3.46% -3.50% -3.22% Select -2.50% -55.81 -60.27 -65.1 -70.3 -75.93 -82

+Non-Cash Working Capital Change -110 NC Wcap Ch/Sales -5.30% -3.03% -2.74% Select -6.00% -133.94 -144.66 -156.23 -168.73 -182.23 -196.8

-Chg in Receivables 77

-Chg in Inventory 44

+Chg in Accts Payable 11

Free Cash Flow to the Firm(FCFF) 231.3 382.3 412.88 445.91 481.58 520.09 561.72

FCFF Per Share $3.99 $6.59 $7.12 $7.69 $8.31 $8.97 $9.69

Capital Structure

Total Equity 1152

Total Debt 1597

Total Capital 2749

%Debt 58.11% Debt/Tcap 58.11% 58.01% 52.78%

%Equity 41.89% Eq/Tcap 41.89% 41.99% 47.22%

High Growth Period

Length - 5 years

Cost of Capital (WACC) 6.60% Select 6.60%

PV of FCFF 358.63 363.34 368.11 372.94 377.83 382.8

Sum of PV FCFF (High Growth) 1840.85

Stable Growth Period

Terminal Growth Rate=10yrBond 2.50% 2.50%

Terminal WACC 6.60% Select 6.60%

FCFF(Year 6) 561.72

Terminal Value of FCFF(Yr6) 13700.49

PV of Terminal Value 9952.91

Value of Operating Assets 11793.76

(PV of High G + PV TermVal)

Less:

TotalDebt 1597

Plus:

Cash 90.38

Value of Equity 10287.14

Shares Outstanding 57.97

Equity Value/Share 177.46

Current Price (3/1/2018) 133.9

Implied Return 32.53%

Valuation

Free Cash Flow to the Firm Workout

Historical Averages

Use To Project

Period Forecasts

Operating Data and Forecasts

$millions, Except per share



Executive Officers

Michael F. Hilton- President and Chief Executive Officer

Mike Hilton is the President and CEO of Nordson Corporation. He joined the firm in 2010 and since his

arrival has led the company to new record sales and earnings results through a depend focus on

innovative products, emerging markets, continuous improvement, and strategic acquisitions. His

decorated background prior to joining Nordson came from his time at Air Products & Chemicals, Inc.

serving as their Senior Vice President and General Manager in Global Electronics.

Gregory A. Thaxton- Executive Vice President and Chief Financial Officer

Greg Thaxton is responsible for overseeing the corporate accounting and reporting, tax, treasure,

internal audit and investor relations function. Prior to his current title, Thaxton was previously elected

as a Nordson Corporate Vice President in 2008. His experience prior to his current role at Nordson

came derived from his time as a group controller for the Pacific South Division and the Finishing and

Coating Systems Segment. He also spent time with the Automotive Systems and UV Curing systems

businesses. He joined Nordson in 1989.

John J. Keane-Executive Vice President

John Keane is Executive Vice President of Nordson Corporation, with extensive experience within all

three of the company's global operating segments. His current duties include the continued

integration and optimization of acquired polymer processing product lines within the company's

Adhesive Dispensing Systems segment. Mr. Keane joined Nordson in 1992 as a project engineer in the

converting product line

James E. DeVries- Executive Vice President, Continuous Improvement

Jim E. DeVries serves as Nordson’s Executive Vice President, Continuous Improvement, reporting

directly to Nordson President and CEO Michael F. Hilton. Mr. DeVries’ current responsibilities include

leadership of a global team tasked with setting productivity goals, defining key metrics, ensuring

overall process consistency across the company, and leading large enterprise step-change projects. He

Joined Nordson in 2010

Gregory P. Merk- Executive Vice President

Greg P. Merk is the Executive Vice President of Nordson Corporation, with global responsibility for the

Packaging, Nonwovens, Product Assembly and Web Coating product lines within the Adhesive

Dispensing Systems segment.



Balance Sheet No

rdso

n Cor

p. - B

alanc

e She

etFY

08A

FY09

AFY

10A

FY11

AFY

12A

FY13

AFY

14A

FY15

AFY

16A

FY17

AFY

18E

FY19

EFY

20E

FY21

EFY

22E

($ in

milli

ons)

Tota

l Ass

ets

1,166

.789

0.798

6.41,3

04.5

1,829

.52,0

53.2

2,280

.12,3

60.5

2,420

.63,4

14.5

3,418

3,445

.53,4

67.8

3,506

.13,5

48.2

Tot

al Cu

rrent

Ass

ets

384.3

346.7

451.0

477.0

586.6

602.1

672.7

711.6

745.6

888.4

914.4

972.2

1,023

.71,0

86.7

1,146

.2

Ca

sh an

d Mar

keta

ble S

ecur

ities

11.8

18.8

50.2

37.4

41.5

42.4

42.3

50.3

67.2

90.4

89.6

92.5

87.2

91.4

90.5

Re

ceiva

bles

- Net

224.8

191.2

243.8

254.3

324.6

308.7

365.8

389.6

428.6

505.1

518.9

555.5

593.6

633.1

674.0

In

vent

ories

- Net

118.0

97.6

117.7

141.9

169.6

198.4

210.9

225.7

220.4

264.3

274.2

290.6

307.5

324.7

342.1

Ot

her C

urre

nt A

ssets

29.7

39.0

39.4

43.3

51.0

52.6

53.7

46.1

29.4

28.6

31.7

33.6

35.5

37.5

39.5

PP&

E, Ne

t13

3.811

8.311

6.413

0.917

5.020

1.122

4.424

9.927

3.134

6.436

9.839

3.041

5.943

8.646

1.1

Oth

er A

sset

s, Ne

t64

8.542

5.741

8.969

6.61,0

67.9

1,250

.01,3

83.0

1,398

.91,4

01.9

2,179

.82,1

33.6

2,080

.32,0

28.1

1,980

.81,9

41.0

Tota

l Liab

ilities

and S

hare

hold

ers’

Equi

ty1,1

66.7

890.7

986.4

1,304

.51,8

29.5

2,053

.22,2

80.1

2,360

.42,4

20.6

3,414

.63,4

183,4

45.5

3,467

.83,5

06.1

3,548

.2

Tot

al Cu

rrent

Liab

ilities

204.0

156.4

191.9

182.2

343.7

236.8

370.9

290.8

331.5

647.8

447.9

711.8

435.8

761.6

476.5

No

tes P

ayab

le an

d Deb

t Due

With

in O

ne Ye

ar46

.45.6

16.4

5.710

5.714

.411

6.924

.040

.232

6.691

.832

6.223

.232

5.618

.3

C

urre

nt M

atur

ities

of Lo

ng-T

erm

Deb

t4.3

4.314

.35.7

55.7

10.8

10.8

22.8

38.1

326.6

91.8

326.2

23.2

325.6

18.3

Ac

coun

ts Pa

yabl

e and

Acc

rued

Liab

ilities

157.6

150.8

175.5

176.5

238.0

222.4

253.9

266.8

291.3

321.2

356.1

385.6

412.5

436.0

458.2

A

ccou

nts P

ayab

le42

.933

.440

.346

.467

.462

.168

.568

.275

.186

.097

.010

4.311

0.411

6.512

2.8

In

com

e Tax

es Pa

yabl

e6.1

12.3

24.3

15.3

27.4

14.5

16.6

28.6

22.8

22.3

26.4

30.5

35.4

36.3

39.5

A

ccru

ed Li

abilit

ies96

.592

.396

.110

1.311

7.411

0.513

7.014

0.916

2.817

3.418

7.320

2.721

5.722

9.123

8.6

C

usto

mer

Adv

ance

d Pay

men

ts7.5

8.811

.09.4

20.9

28.3

25.6

22.9

26.2

34.7

40.4

43.3

46.2

49.3

52.5

C

urre

nt O

bliga

tions

Und

er Ca

pita

l Lea

ses

4.64.0

3.84.1

4.95.5

5.14.9

4.44.8

5.04.8

4.84.8

4.8

Lon

g-ter

m D

ebt

238.6

152.3

96.0

313.5

528.0

638.2

682.9

1,092

.694

2.81,2

56.4

1,361

.899

1.21,0

52.4

534.4

652.4

Oth

er Li

abilit

ies15

0.021

2.019

3.423

7.528

8.029

0.432

1.631

7.029

4.735

4.934

4.035

4.136

1.436

9.138

6.9

Pe

nsio

n Obl

igatio

ns66

.913

3.110

3.312

3.116

1.410

3.812

4.111

8.113

0.411

1.711

7.612

0.411

9.611

9.911

7.8

De

ferre

d Inc

ome T

axes

2.30.0

9.717

.426

.289

.587

.189

.861

.813

4.112

0.712

6.413

5.114

2.916

2.1

Po

stret

irem

ent O

bliga

tions

35.4

50.8

53.9

71.9

69.9

59.8

68.3

66.7

70.4

73.6

67.8

69.3

69.6

70.1

70.1

Ob

ligat

ions

Und

er Ca

pita

l Lea

ses

6.13.0

3.35.2

10.9

10.1

11.0

9.79.7

9.710

.010

.09.8

9.99.9

Ot

her L

iabilit

ies39

.425

.223

.119

.919

.727

.231

.132

.822

.325

.927

.928

.027

.426

.327

.1

Tot

al Sh

areh

olde

rs' E

quity

574.1

370.0

505.1

571.3

669.8

887.9

904.8

660.0

851.6

1,155

.51,2

64.1

1,388

.41,6

18.2

1,841

.02,0

32.4

Co

mm

on Sh

ares

12.3

12.3

12.3

12.3

12.3

12.3

12.3

12.3

12.3

12.3

12.3

12.3

12.3

12.3

12.3

Ca

pita

l in Ex

cess

of St

ated

Valu

e24

4.124

1.525

5.627

2.928

7.630

4.532

8.634

9.037

6.641

2.843

7.646

3.849

1.651

6.254

2.0

Re

tain

ed Ea

rnin

gs84

0.965

6.179

7.799

0.21,1

81.2

1,362

.61,5

61.0

1,717

.21,9

32.6

2,164

.62,4

52.0

2,766

.83,1

08.3

3,481

.73,8

85.9

Ac

cum

ulat

ed O

CI(4

0.8)

(55.5

)(6

6.3)

(80.0

)(1

04.2)

(57.4

)(1

03.2)

(144

.7)(1

68.2)

(134

.4)(1

38.6)

(148

.4)(1

58.5)

(169

.1)(1

80.0)

Co

mm

on Sh

ares

in Tr

easu

ry, a

t Cos

t(4

82.3)

(484

.4)(4

94.2)

(624

.1)(7

07.1)

(734

.1)(8

93.8)

(1,27

3.8)

(1,30

1.7)

(1,29

9.7)

(1,49

9.2)

(1,70

6.1)

(1,83

5.5)

(2,00

0.1)

(2,22

7.7)

Leve

rage

(%)

LT D

ebt/T

otal

Capi

tal

8.6%

29.0%

15.9%

35.4%

40.9%

41.7%

40.3%

61.5%

51.6%

46.0%

51.9%

41.7%

39.4%

22.5%

24.3%

Net D

ebt/T

otal

Capi

tal

32.6%

27.3%

11.1%

32.4%

46.1%

40.2%

45.0%

60.4%

50.4%

54.7%

48.4%

37.8%

36.1%

18.7%

20.9%

Tota

l Deb

t/Tot

al Ca

pita

l34

.0%30

.8%19

.1%36

.5%49

.2%42

.9%47

.4%63

.2%54

.0%58

.0%55

.4%55

.4%40

.3%36

.2%25

.0%



Cash Flow Statement and Ratios

Nor

dson

Cor

p. -

Cash

Flo

w S

tate

men

tFY

08A

FY09

AFY

10A

FY11

AFY

12A

FY13

AFY

14A

FY15

AFY

16A

FY17

AFY

18E

FY19

EFY

20E

FY21

EFY

22E

($ in

mill

ions

)

Net

Cas

h Pr

ovid

ed b

y O

pera

ting

Activ

ities

114.

016

8.7

140.

224

6.7

274.

426

8.4

288.

226

2.0

331.

234

9.7

389.

242

3.4

465.

051

3.6

551.

4

Inc

ome

from

Con

tinui

ng O

pera

tions

117.

5(1

60.1

)16

8.0

222.

422

4.8

221.

824

6.8

211.

127

1.8

295.

837

1.7

413.

145

5.3

506.

355

7.8

Dep

reci

atio

n an

d Am

ortiz

atio

n32

.231

.428

.928

.839

.054

.459

.865

.270

.390

.998

.397

.696

.690

.786

.2

Cha

nges

in O

pera

ting

Asse

ts a

nd Li

abili

ties

(20.

9)30

.1(7

3.6)

(8.7

)(4

.5)

(19.

0)(3

4.4)

(29.

5)(2

7.8)

(56.

6)(8

0.8)

(87.

3)(8

6.9)

(83.

4)(9

2.7)

Net

Cas

h us

ed in

/ Pr

ovid

ed b

y In

vest

ing

Activ

ities

(31.

9)(3

.9)

(41.

3)(3

05.5

)(4

66.8

)(2

20.5

)(2

30.5

)(1

38.5

)(1

02.2

)(8

78.0

)(6

6.9)

(66.

2)(6

5.5)

(64.

9)(6

4.2)

Cap

Ex, N

et(2

4.0)

(3.9

)(1

4.0)

(20.

1)(2

4.8)

(43.

4)(4

3.3)

(61.

5)(5

9.6)

(67.

6)(6

6.9)

(66.

2)(6

5.5)

(64.

9)(6

4.2)

Net

Cas

h us

ed in

/ Pr

ovid

ed b

y Fi

nanc

ing

Activ

ities

(103

.0)

(161

.0)

(79.

5)50

.819

6.5

(52.

4)(5

3.4)

(110

.7)

(210

.3)

547.

8(3

23.1

)(3

54.3

)(4

04.9

)(4

44.4

)(4

88.0

)

To

tal D

ebt,

Net

(61.

6)(1

27.3

)(4

5.1)

206.

731

4.6

15.7

153.

832

5.5

(130

.2)

602.

2(3

9.3)

(49.

0)(1

61.8

)(1

46.9

)(1

06.7

)

Pur

chas

e of

Tre

asur

y Sh

ares

(35.

6)(7

.1)

(24.

9)(1

38.0

)(8

8.5)

(33.

4)(1

66.4

)(3

83.9

)(3

3.4)

(3.2

)(1

99.5

)(2

06.9

)(1

29.3

)(1

64.7

)(2

27.6

)

Div

iden

ds P

aid

(25.

0)(2

4.7)

(26.

7)(2

9.8)

(34.

1)(4

0.5)

(48.

4)(5

4.6)

(56.

5)(6

3.9)

(84.

3)(9

8.3)

(113

.8)

(132

.9)

(153

.7)

Incr

ease

/ De

crea

se in

Cas

h an

d Ca

sh E

quiv

alen

ts(1

9.4)

7.0

23.5

(4.9

)3.

81.

1(0

.1)

8.0

17.0

23.1

(0.8

)3.

0(5

.4)

4.2

(0.8

)

Cash

and

Cas

h Eq

uiva

lent

s Beg

inni

ng o

f Per

iod

31.1

11.8

18.8

42.3

37.4

41.2

42.4

42.3

50.3

67.2

90.4

89.6

92.5

87.2

91.4

Cash

and

Cas

h Eq

uiva

lent

s End

of P

erio

d11

.818

.842

.337

.441

.242

.442

.350

.367

.290

.489

.692

.587

.291

.490

.5

Ratio

sFY

08A

FY09

AFY

10A

FY11

AFY

12A

FY13

AFY

14A

FY15

AFY

16A

FY17

AFY

18E

FY19

EFY

20E

FY21

EFY

22E

Prof

itabi

lity

(%)

Gros

s Mar

gin

56.0

%57

.2%

59.7

%60

.7%

58.4

%56

.1%

55.5

%54

.1%

54.9

%55

.1%

55.6

%56

.0%

56.4

%56

.9%

57.3

%

SG&

A to

Sal

es33

.3%

34.8

%32

.5%

0.0%

30.0

%29

.9%

29.0

%28

.0%

26.4

%25

.9%

25.9

%25

.8%

25.8

%25

.8%

25.7

%

Ope

ratin

g M

argi

n16

.9%

-15.

6%22

.5%

56.5

%23

.8%

21.0

%21

.5%

18.8

%21

.5%

22.1

%22

.8%

23.6

%24

.4%

25.3

%26

.1%

Pret

ax M

argi

n16

.0%

-15.

5%22

.2%

56.5

%23

.1%

20.2

%20

.7%

17.8

%20

.4%

20.3

%21

.5%

22.3

%23

.0%

24.0

%24

.8%

Net

Mar

gin

10.4

%-1

9.5%

16.1

%49

.0%

16.0

%14

.4%

14.5

%12

.5%

15.0

%14

.3%

16.1

%16

.7%

17.2

%18

.0%

18.6

%

Free

Cas

h Fl

ow M

argi

n7.

8%19

.1%

12.1

%18

.4%

17.3

%14

.3%

14.4

%11

.8%

14.9

%13

.5%

16.8

%17

.1%

17.6

%18

.2%

18.4

%

Retu

rn o

n As

sets

9.6%

-15.

6%17

.9%

52.7

%14

.3%

11.4

%11

.4%

9.1%

11.4

%10

.1%

10.9

%12

.0%

13.2

%14

.5%

15.8

%

Retu

rn o

n Eq

uity

21.3

%-3

3.9%

38.4

%11

2.2%

36.2

%28

.5%

27.5

%27

.0%

36.0

%29

.5%

30.7

%31

.1%

30.3

%29

.3%

28.8

%

Retu

rn o

n To

tal C

apita

l13

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8%29

.0%

29.2

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15.4

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12.0

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12.9

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24.5

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30.0

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Retu

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n In

vest

ed C

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l19

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3%29

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12.6

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14.0

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13.2

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15.7

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Valu

atio

n (x

)

Pric

e/Sa

les

1.1x

2.2x

2.6x

2.6x

2.7x

3.0x

2.9x

2.6x

3.2x

3.6x

3.3x

3.0x

2.7x

2.5x

2.3x

Pric

e/Ea

rnin

gs10

.8x

--15

.9x

14.3

x17

.1x

21.1

x19

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20.7

x21

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26.9

x20

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17.7

x15

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13.8

x12

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Pric

e/Bo

ok V

alue

2.2x

4.8x

5.2x

5.3x

5.7x

5.2x

5.3x

6.2x

6.7x

6.3x

6.0x

5.3x

4.4x

3.8x

3.3x

Pric

e/Fr

ee C

ash

Flow

14.5

x11

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21.2

x14

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15.8

x21

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20.1

x21

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21.3

x26

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22.1

x19

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16.8

x14

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13.3

x

Ente

rpris

e Va

lue/

EBIT

DA6.

7x11

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10.2

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6x11

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13.9

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13.1

x14

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15.6

x12

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10.7

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6x8.

7x7.

8x

DuPo

nt A

naly

sis

Ass

et T

urno

ver (

x)0.

9x0.

8x1.

1x1.

1x0.

9x0.

8x0.

8x0.

7x0.

8x0.

7x0.

7x0.

7x0.

8x0.

8x0.

9x

x P

reta

x Mar

gin

(%)

16.0

%-1

5.5%

22.2

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23.2

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20.7

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20.4

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21.5

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23.0

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24.8

%

= P

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x Ret

urn

on A

sset

s (%

)14

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27.5

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16.1

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13.0

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14.4

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x T

ax R

ate

Com

plem

ent (

1-Ta

x Rat

e)65

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70.2

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75.0

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= R

etur

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Ass

ets (

%)

9.6%

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19.4

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11.5

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%10

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10.9

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13.2

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15.8

%

x E

quity

Mul

tiplie

r (As

sets

/Equ

ity)

2.2x

2.2x

2.2x

2.1x

2.5x

2.5x

2.4x

3.0x

3.2x

2.9x

2.7x

2.5x

2.1x

1.9x

1.7x

= R

etur

n on

Equ

ity (%

)21

.26%

-33.

91%

38.4

1%41

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36.2

3%28

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27.5

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35.9

7%29

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29.4

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28.2

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27.6

%

Cove

rage

(x)

Net

Deb

t/EB

ITDA

1.2x

0.9x

0.3x

0.8x

1.6x

1.7x

1.8x

2.7x

2.0x

2.7x

2.2x

1.8x

1.3x

1.0x

0.7x

Net

Deb

t/(E

BITD

A-Ca

pex)

1.4x

1.0x

0.3x

0.9x

1.8x

1.9x

2.0x

3.3x

2.3x

3.1x

2.4x

2.0x

1.5x

1.0x

0.7x

Tota

l Deb

t/EB

ITDA

1.3x

1.0x

0.5x

0.9x

1.7x

1.8x

1.9x

2.9x

2.1x

2.8x

2.3x

1.9x

1.5x

1.1x

0.8x

FCF/

Tota

l Deb

t0.

3x1.

0x1.

1x0.

7x0.

4x0.

3x0.

3x0.

2x0.

3x0.

2x0.

2x0.

3x0.

4x0.

6x0.

8x

Forw

ard

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