Financial Analysis: Ferguson (NYSE:FERG) & Nordson (NASDAQ:NDSN)

Ferguson (NYSE:FERG) and Nordson (NASDAQ:NDSN) are both large-cap industrials companies, but which is the better business? We will contrast the two businesses based on the strength of their dividends, risk, profitability, institutional ownership, valuation, earnings and analyst recommendations.

Volatility and Risk

Ferguson has a beta of 1.15, meaning that its share price is 15% more volatile than the S&P 500. Comparatively, Nordson has a beta of 0.94, meaning that its share price is 6% less volatile than the S&P 500.

Profitability

This table compares Ferguson and Nordson’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ferguson	6.03%	35.64%	11.73%
Nordson	16.34%	19.45%	9.55%

Insider & Institutional Ownership

82.0% of Ferguson shares are owned by institutional investors. Comparatively, 72.1% of Nordson shares are owned by institutional investors. 0.2% of Ferguson shares are owned by insiders. Comparatively, 0.8% of Nordson shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Dividends

Ferguson pays an annual dividend of $3.32 per share and has a dividend yield of 1.5%. Nordson pays an annual dividend of $3.28 per share and has a dividend yield of 1.4%. Ferguson pays out 35.5% of its earnings in the form of a dividend. Nordson pays out 41.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Nordson has increased its dividend for 62 consecutive years. Ferguson is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Ferguson and Nordson”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ferguson	$30.76 billion	1.45	$1.86 billion	$9.34	24.18
Nordson	$2.69 billion	4.74	$467.28 million	$7.96	28.52

Ferguson has higher revenue and earnings than Nordson. Ferguson is trading at a lower price-to-earnings ratio than Nordson, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings for Ferguson and Nordson, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ferguson	0	2	0	1	2.67
Nordson	0	6	4	1	2.55

Nordson has a consensus target price of $255.75, indicating a potential upside of 12.67%. Given Nordson’s higher possible upside, analysts clearly believe Nordson is more favorable than Ferguson.

Summary

Ferguson beats Nordson on 10 of the 17 factors compared between the two stocks.

About Ferguson

Ferguson Enterprises Inc. distributes plumbing and heating products in North America. The company provides expertise, solutions, and products, including infrastructure, plumbing, appliances, fire, and fabrication, as well as heating, ventilation, and air conditioning (HVAC) to residential and non-residential customers. It also supplies specialist water and wastewater treatment products to residential, commercial, and infrastructure contractors, as well as supplies pipe, valves, and fittings solutions to industrial customers. In addition, it offers customized solutions, such as virtual design, fabrication, valve actuation, pre-assembly, kitting, installation, and project management services, as well as after-sales support that comprises warranty, credit, project-based billing, returns and maintenance, and repair and operations support. The company sells its products through a network of distribution centers, branches, counter service and specialist sales associates, showroom consultants, and e-commerce channels. Ferguson Enterprises Inc. was founded in 1953 and is headquartered in Newport News, Virginia.

About Nordson

Nordson Corporation engineers, manufactures, and markets products and systems to dispense, apply, and control adhesives, coatings, polymers, sealants, biomaterials, and other fluids worldwide. It operates through three segments: Industrial Precision Solutions; Medical and Fluid Solutions; and Advanced Technology Solutions. The Industrial Precision Solutions segment provides dispensing, coating, and laminating systems for adhesives, lotions, liquids, and fibers to disposable products and roll goods; automated adhesive dispensing systems used in packaged goods industries; components and systems used in the thermoplastic and biopolymer melt stream; precision agriculture spraying solutions; fluid components, such as nozzles, pumps, and filters; and product assembly systems for use in paper and paperboard converting applications, and manufacturing roll goods. It also offers automated and manual dispensing products and systems for cold materials, container coating, liquid finishing, and powder coating, as well as ultraviolet equipment used primarily in curing and drying operations. The Medical and Fluid Solutions segment offers medical devices, including cannulas, catheters, and medical balloons; single-use plastic components; precision manual and semi-automated dispensers; minimally invasive interventional delivery devices; and plastic molded syringes, cartridges, tips, and fluid connection components. The Advanced Technology Solutions segment provides automated dispensing systems for the attachment, protection, and coating of fluids, as well as related gas plasma treatment systems for cleaning and conditioning surfaces; and bond testing and automated optical, acoustic microscopy, and x-ray inspection systems for use in semiconductor and printed circuit board industries. The company markets its products through direct sales force, as well as distributors and sales representatives. Nordson Corporation was founded in 1909 and is headquartered in Westlake, Ohio.