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Nordson vs. Altra Industrial: Which Stock is a Better Buy?
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So far in 2017, the U.S. market has exhibited signs of improvement, with major stock indexes yielding solid returns. Year to date, the S&P 500 is up 15.3%, while the Nasdaq Composite and NYSE Composite are up 26.1% and 11.4%, respectively.
We believe that Trump government’s promised growth policies, especially the proposed $1 trillion spending on infrastructure improvement, has been one of the primary forces behind the rally. Other tailwinds include a strengthening housing and commercial construction markets as well as steady growth in new job additions. Also, the country’s Gross Domestic Product (GDP) grew at an annualized rate of 3% in the third quarter of 2017.
Industrial Products, one of the 16 Zacks sectors, has gained 17.4% year to date. Industrial stocks are well poised to gain traction from the proposed growth plans of the government. Also, year-over-year growth of roughly 2.9% in industrial production (a measure of the level of output of manufacturing, mining and utilities sectors in a country) in October is a positive for industrial stocks.
Given the favorable trends, we would like to bring forth two names — Altra Industrial Motion Corporation and Nordson Corporation (NDSN - Free Report) — that hold healthy growth prospects and can be of interest to investors seeking exposure to the industrial sector. Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
What if we are to choose the best bet among these two stocks?
Let’s briefly discuss the factors that can be used as deciding parameters for finding the best pick between these two industrial stocks. Before we begin, a quick recap of the business profile of these companies will be of help.
Altra Industrial manufactures and distributes a diversified range of mechanical power transmission (MPT) components like clutches & brakes, couplings, and gearing & power transmission components. On the other hand, Nordson manufactures and distributes products and systems designed to dispense, apply and control adhesives, coatings, polymers, sealants, biomaterials, and other fluids.
Company Size, Recommendations and Price Performance: Altra Industrial has market capitalization of approximately $1.4 billion. The stock has been rated positively by two brokerage firms while three firms have issued neutral recommendations. Its average brokerage recommendation (ABR) currently is 2.20.
In comparison, Nordson’s market capitalization is $7.4 billion. It holds a better ABR of 1.67 (average of six positive ratings and three neutral recommendations).
Nordson shares have rallied 14.5% in the last three months, outperforming 5.9% increase in Altra Industrial Motion’s share price.|
Target Price and Valuation: Altra Industrial’s target price is $53 while that for Nordson is $142.
Based on projected price-to-earnings ratio (P/E), Nordson is favorably valued compared to Altra Industrial with respective tallies of 21.9 and 23.2.
Profitability Ratios: Nordson’s margin profile seems much better than Altra Industrial, with pre-tax and net margins of 20.6% and 14.6%, respectively. These are higher than pre-tax margin of 6.7% and net margin of 4.9% recorded by Altra Industrial.
Additionally, Nordson’s return on assets and equity are 10.7% and 33%, respectively. These returns are higher than 6.3% return on assets and 16.3% return on equity provided by Altra Industrial.
Dividends: Both the companies believe in rewarding their shareholders handsomely through dividend payments. While Altra Industrial’s annual dividend is 68 cents per share and payout ratio is 1.4%, the same for Nordson is $1.20 per share and roughly 1%.
Year to date, Nordson has increased its quarterly dividend rate by 11% to 30 cents while Altra Industrial has hiked its rate by 13% to 17 cents.
Leverage: Nordson is highly leveraged considering its debt burden. Its debt to equity is 144.7%, way higher than 77% for Altra Industrial.
Also, long-term debt to capital is 59.1% compared with 43.5% for Altra Industrial.
Long-Term Aspects: In the long term, Altra Industrial anticipates revenue growth to be in excess of the Gross Domestic Product. It aims to improve its operating margin by 150 basis points on strategic pricing.
On the other hand, Nordson anticipates revenue growth to be roughly twice the global Gross Domestic Product percentage. It aims its operating margin to be better than its revenue growth percentage.
Our Take
Considering the factors discussed above, Nordson seems to be a better investment choice than Altra Industrial.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
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Nordson vs. Altra Industrial: Which Stock is a Better Buy?
So far in 2017, the U.S. market has exhibited signs of improvement, with major stock indexes yielding solid returns. Year to date, the S&P 500 is up 15.3%, while the Nasdaq Composite and NYSE Composite are up 26.1% and 11.4%, respectively.
We believe that Trump government’s promised growth policies, especially the proposed $1 trillion spending on infrastructure improvement, has been one of the primary forces behind the rally. Other tailwinds include a strengthening housing and commercial construction markets as well as steady growth in new job additions. Also, the country’s Gross Domestic Product (GDP) grew at an annualized rate of 3% in the third quarter of 2017.
Industrial Products, one of the 16 Zacks sectors, has gained 17.4% year to date. Industrial stocks are well poised to gain traction from the proposed growth plans of the government. Also, year-over-year growth of roughly 2.9% in industrial production (a measure of the level of output of manufacturing, mining and utilities sectors in a country) in October is a positive for industrial stocks.
Given the favorable trends, we would like to bring forth two names — Altra Industrial Motion Corporation and Nordson Corporation (NDSN - Free Report) — that hold healthy growth prospects and can be of interest to investors seeking exposure to the industrial sector. Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
What if we are to choose the best bet among these two stocks?
Let’s briefly discuss the factors that can be used as deciding parameters for finding the best pick between these two industrial stocks. Before we begin, a quick recap of the business profile of these companies will be of help.
Altra Industrial manufactures and distributes a diversified range of mechanical power transmission (MPT) components like clutches & brakes, couplings, and gearing & power transmission components. On the other hand, Nordson manufactures and distributes products and systems designed to dispense, apply and control adhesives, coatings, polymers, sealants, biomaterials, and other fluids.
Company Size, Recommendations and Price Performance: Altra Industrial has market capitalization of approximately $1.4 billion. The stock has been rated positively by two brokerage firms while three firms have issued neutral recommendations. Its average brokerage recommendation (ABR) currently is 2.20.
In comparison, Nordson’s market capitalization is $7.4 billion. It holds a better ABR of 1.67 (average of six positive ratings and three neutral recommendations).
Nordson shares have rallied 14.5% in the last three months, outperforming 5.9% increase in Altra Industrial Motion’s share price.|
Target Price and Valuation: Altra Industrial’s target price is $53 while that for Nordson is $142.
Based on projected price-to-earnings ratio (P/E), Nordson is favorably valued compared to Altra Industrial with respective tallies of 21.9 and 23.2.
Profitability Ratios: Nordson’s margin profile seems much better than Altra Industrial, with pre-tax and net margins of 20.6% and 14.6%, respectively. These are higher than pre-tax margin of 6.7% and net margin of 4.9% recorded by Altra Industrial.
Additionally, Nordson’s return on assets and equity are 10.7% and 33%, respectively. These returns are higher than 6.3% return on assets and 16.3% return on equity provided by Altra Industrial.
Dividends: Both the companies believe in rewarding their shareholders handsomely through dividend payments. While Altra Industrial’s annual dividend is 68 cents per share and payout ratio is 1.4%, the same for Nordson is $1.20 per share and roughly 1%.
Year to date, Nordson has increased its quarterly dividend rate by 11% to 30 cents while Altra Industrial has hiked its rate by 13% to 17 cents.
Leverage: Nordson is highly leveraged considering its debt burden. Its debt to equity is 144.7%, way higher than 77% for Altra Industrial.
Also, long-term debt to capital is 59.1% compared with 43.5% for Altra Industrial.
Long-Term Aspects: In the long term, Altra Industrial anticipates revenue growth to be in excess of the Gross Domestic Product. It aims to improve its operating margin by 150 basis points on strategic pricing.
On the other hand, Nordson anticipates revenue growth to be roughly twice the global Gross Domestic Product percentage. It aims its operating margin to be better than its revenue growth percentage.
Our Take
Considering the factors discussed above, Nordson seems to be a better investment choice than Altra Industrial.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
Click here for Zacks' secret trade>>