UFP Technologies Inc (UFPT, Financial) experienced a -12.35% drop in its stock value, with a 3-month loss of -30%. Despite this, its Earnings Per Share (EPS) stands at 6.48. This raises the question: Is UFP Technologies fairly valued? This article will delve into a valuation analysis to answer this question and provide a comprehensive understanding of the company's intrinsic value.
About UFP Technologies Inc
UFP Technologies Inc is a renowned designer and custom manufacturer of components, subassemblies, products, and packaging, primarily catering to the medical market. The company's expertise lies in converting raw materials using advanced manufacturing techniques such as laminating, molding, radio frequency, and impulse welding. UFP Technologies plays a pivotal role in the medical device supply chain and is a valued outsource partner to many of the world's top medical device manufacturers.
Understanding GF Value
The GF Value is a proprietary measure that provides an estimate of a stock's intrinsic value. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at.
Based on the GF Value, UFP Technologies (UFPT, Financial) appears to be fairly valued. At its current price of $136.67 per share, UFP Technologies has a market cap of $1 billion, suggesting a fair valuation. As UFP Technologies is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Assessing UFP Technologies' Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. Factors such as the cash-to-debt ratio and interest coverage of a company offer a great way to understand its financial strength. UFP Technologies has a cash-to-debt ratio of 0.07, ranking worse than 94.35% of 832 companies in the Medical Devices & Instruments industry. Despite this, the overall financial strength of UFP Technologies is 7 out of 10, indicating fair financial strength.
Profitability and Growth of UFP Technologies
Companies that have been consistently profitable over the long term offer less risk to investors. UFP Technologies has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $386 million and Earnings Per Share (EPS) of $6.48. Its operating margin is 15.06%, which ranks better than 75.87% of 829 companies in the Medical Devices & Instruments industry. Overall, the profitability of UFP Technologies is ranked 8 out of 10, indicating strong profitability.
Growth is an essential factor in the valuation of a company. The 3-year average annual revenue growth of UFP Technologies is 20.5%, which ranks better than 77.38% of 725 companies in the Medical Devices & Instruments industry. The 3-year average EBITDA growth rate is 26.7%, ranking better than 72.9% of 727 companies in the same industry.
Comparing ROIC and WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, UFP Technologies's ROIC was 13.36, while its WACC came in at 8.92.
Conclusion
In conclusion, the stock of UFP Technologies (UFPT, Financial) gives every indication of being fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 72.9% of 727 companies in the Medical Devices & Instruments industry. To learn more about UFP Technologies stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
