Should You Think About Buying UFP Technologies, Inc. (NASDAQ:UFPT) Now?

While UFP Technologies, Inc. (NASDAQ:UFPT) might not have the largest market cap around , it saw significant share price movement during recent months on the NASDAQCM, rising to highs of US$358 and falling to the lows of US$242. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether UFP Technologies' current trading price of US$255 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at UFP Technologies’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for UFP Technologies

Is UFP Technologies Still Cheap?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’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 36.04x is currently trading slightly above its industry peers’ ratio of 35.6x, which means if you buy UFP Technologies today, you’d be paying a relatively reasonable price for it. And if you believe that UFP Technologies should be trading at this level in the long run, then there should only be a fairly immaterial downside vs 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?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 42% over the next couple of years, the future seems bright for UFP Technologies. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in UFPT’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. 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 an eye 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.

So while earnings quality is important, it's equally important to consider the risks facing UFP Technologies at this point in time. You'd be interested to know, that we found 2 warning signs for UFP Technologies and you'll want to know about these.

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.