Even after rising 14% this past week, Ultralife (NASDAQ:ULBI) shareholders are still down 43% over the past year

By
Simply Wall St
Published
May 24, 2022
NasdaqGM:ULBI
Source: Shutterstock

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by Ultralife Corporation (NASDAQ:ULBI) shareholders over the last year, as the share price declined 43%. That's disappointing when you consider the market declined 11%. Even if you look out three years, the returns are still disappointing, with the share price down32% in that time.

The recent uptick of 14% could be a positive sign of things to come, so let's take a lot at historical fundamentals.

View our latest analysis for Ultralife

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 the last year Ultralife saw its earnings per share drop below zero. Buyers no doubt think it's a temporary situation, but those with a nose for quality have low tolerance for losses. However, there may be an opportunity for investors if the company can recover.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
NasdaqGM:ULBI Earnings Per Share Growth May 24th 2022

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of Ultralife's earnings, revenue and cash flow.

A Different Perspective

We regret to report that Ultralife shareholders are down 43% for the year. Unfortunately, that's worse than the broader market decline of 11%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Ultralife better, we need to consider many other factors. For instance, we've identified 1 warning sign for Ultralife that you should be aware of.

Ultralife is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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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