MSC Industrial Direct (NYSE: MSM) and Nordson Corporation (NASDAQ:NDSN) are both mid-cap industrial products companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, earnings, institutional ownership, profitability, dividends, analyst recommendations and valuation.

Volatility and Risk

MSC Industrial Direct has a beta of 0.54, indicating that its stock price is 46% less volatile than the S&P 500. Comparatively, Nordson Corporation has a beta of 1.37, indicating that its stock price is 37% more volatile than the S&P 500.

Insider & Institutional Ownership

75.6% of MSC Industrial Direct shares are held by institutional investors. Comparatively, 65.5% of Nordson Corporation shares are held by institutional investors. 31.3% of MSC Industrial Direct shares are held by company insiders. Comparatively, 2.2% of Nordson Corporation shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares MSC Industrial Direct and Nordson Corporation’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
MSC Industrial Direct $2.88 billion 1.47 $443.59 million $3.99 18.69
Nordson Corporation $2.00 billion 3.49 $548.73 million $5.02 24.12

Nordson Corporation has higher revenue, but lower earnings than MSC Industrial Direct. MSC Industrial Direct is trading at a lower price-to-earnings ratio than Nordson Corporation, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares MSC Industrial Direct and Nordson Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
MSC Industrial Direct 8.07% 20.05% 11.38%
Nordson Corporation 14.57% 32.99% 10.73%

Analyst Recommendations

This is a summary of recent ratings and target prices for MSC Industrial Direct and Nordson Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
MSC Industrial Direct 1 10 4 0 2.20
Nordson Corporation 0 3 6 0 2.67

MSC Industrial Direct currently has a consensus target price of $89.92, suggesting a potential upside of 20.56%. Nordson Corporation has a consensus target price of $139.71, suggesting a potential upside of 15.39%. Given MSC Industrial Direct’s higher possible upside, analysts clearly believe MSC Industrial Direct is more favorable than Nordson Corporation.

Dividends

MSC Industrial Direct pays an annual dividend of $1.80 per share and has a dividend yield of 2.4%. Nordson Corporation pays an annual dividend of $1.20 per share and has a dividend yield of 1.0%. MSC Industrial Direct pays out 45.1% of its earnings in the form of a dividend. Nordson Corporation pays out 23.9% 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. MSC Industrial Direct has increased its dividend for 6 consecutive years and Nordson Corporation has increased its dividend for 3 consecutive years. MSC Industrial Direct is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Nordson Corporation beats MSC Industrial Direct on 10 of the 17 factors compared between the two stocks.

MSC Industrial Direct Company Profile

MSC Industrial Direct Co., Inc. is a North American distributor of metalworking and maintenance, repair and operations (MRO) products and services. The Company’s range of MRO products include cutting tools, measuring instruments, tooling components, metalworking products, fasteners, flat stock, raw materials, abrasives, machinery hand and power tools, safety and janitorial supplies, plumbing supplies, materials handling products, power transmission components and electrical supplies. The Company serves a range of customers throughout the United States, Canada and the United Kingdom, from individual machine shops, to manufacturing companies, to government agencies, such as the General Services Administration and the Department of Defense. The Company also serves durable and non-durable goods manufacturing, education and healthcare markets, among others. As of September 3, 2016, the Company had operated a network of 12 customer fulfillment centers.

Nordson Corporation Company Profile

Nordson Corporation engineers, manufactures and markets differentiated products and systems used to dispense, apply and control adhesives, coatings, polymers, sealants, biomaterials, and other fluids, to test and inspect for quality, and to treat and cure surfaces. The Company’s segments include Adhesive Dispensing Systems, Advanced Technology Systems and Industrial Coating Systems. The Adhesive Dispensing Systems segment delivers its precision dispensing and processing technology to various markets. The Advanced Technology Systems segment integrates its product technologies found in progressive stages of a customer’s production process, such as surface treatment, precisely controlled automated, and post-dispense bond testing, optical inspection and X-ray inspection. The Industrial Coating Systems segment provides equipment used primarily for applying coatings, paint, finishes, sealants and other materials, and for curing and drying of dispensed material.

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