Is It Too Late To Consider Buying UFP Technologies, Inc. (NASDAQ:UFPT)?
UFP Technologies, Inc. (NASDAQ:UFPT), might not be a large cap stock, but it led the NASDAQCM gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at UFP Technologies’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for UFP Technologies
What is UFP Technologies worth?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 33.35x is currently trading slightly below its industry peers’ ratio of 35.17x, which means if you buy UFP Technologies today, you’d be paying a decent price for it. And if you believe that UFP Technologies should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, UFP Technologies’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What does the future of UFP Technologies look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. In the upcoming year, UFP Technologies' earnings are expected to increase by 75%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? UFPT’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at UFPT? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on UFPT, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for UFPT, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - UFP Technologies has 1 warning sign we think you should be aware of.
If you are no longer interested in UFP Technologies, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.
