Ultra Clean Holdings (NASDAQ:UCTT) sheds 3.8% this week, as yearly returns fall more in line with earnings growth
While Ultra Clean Holdings, Inc. (NASDAQ:UCTT) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 27% in the last quarter. But over three years the performance has been really wonderful. Indeed, the share price is up a whopping 316% in that time. As long term investors the recent fall doesn't detract all that much from the longer term story. The share price action could signify that the business itself is dramatically improved, in that time.
While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
See our latest analysis for Ultra Clean Holdings
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During three years of share price growth, Ultra Clean Holdings achieved compound earnings per share growth of 41% per year. This EPS growth is lower than the 61% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. That's not necessarily surprising considering the three-year track record of earnings growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Ultra Clean Holdings has improved its bottom line over the last three years, but what does the future have in store? 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
While the broader market gained around 7.7% in the last year, Ultra Clean Holdings shareholders lost 24%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 21% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 3 warning signs for Ultra Clean Holdings that you should be aware of before investing here.
But note: Ultra Clean Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
