Despite lower earnings than five years ago, Ultra Clean Holdings (NASDAQ:UCTT) investors are up 165% since then
When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Ultra Clean Holdings, Inc. (NASDAQ:UCTT) which saw its share price drive 165% higher over five years. On top of that, the share price is up 33% in about a quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.
In light of the stock dropping 4.5% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.
View our latest analysis for Ultra Clean Holdings
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During five years of share price growth, Ultra Clean Holdings actually saw its EPS drop 25% per year.
Essentially, it doesn't seem likely that investors are focused on EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
On the other hand, Ultra Clean Holdings' revenue is growing nicely, at a compound rate of 20% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling Ultra Clean Holdings stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Ultra Clean Holdings shareholders have received returns of 8.6% over twelve months, which isn't far from the general market return. We should note here that the five-year TSR is more impressive, at 21% per year. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Ultra Clean Holdings a stock worth watching. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Ultra Clean Holdings you should know about.
Of course Ultra Clean Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
