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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of industrial product manufacturer Nordson (NASDAQ: NDSN ) dropped as much as 10% today after the company reported fiscal second-quarter earnings.
So what: Revenue rose 21%, to $382.1 million, in the quarter, and net income was up 5%, to $54.6 million, or $0.84 per share. Both figures were in line with expectations, but the company said fiscal third-quarter earnings would be $1 to $1.09 per share, and analysts were expecting $1.15. Revenue guidance of $404 million to $419 million was also short of the $428.6 million estimate.
Now what: Organic sales growth is only expected to grow by about 2%, so Nordson is relying on acquisitions for most of its growth. This level of growth just isn't enough to keep the stock at current valuations and, with a forward P/E of 15 even before analysts adjust for guidance, I think it's still too expensive. I'd sell the news today, and wait for Nordson to either fall to a better value, or pick up organic growth in the future before buying in.
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