Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term UFP Technologies, Inc. (NASDAQ:UFPT) shareholders have enjoyed a 90% share price rise over the last half decade, well in excess of the market return of around 44% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 12%.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).
Over half a decade, UFP Technologies managed to grow its earnings per share at 9.2% a year. This EPS growth is lower than the 14% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that UFP Technologies has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
A Different Perspective
We're pleased to report that UFP Technologies shareholders have received a total shareholder return of 12% over one year. Having said that, the five-year TSR of 14% a year, is even better. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.