UFP Technologies (NASDAQ:UFPT) sheds 3.4% this week, as yearly returns fall more in line with earnings growth

We think all investors should try to buy and hold high quality multi-year winners. And highest quality companies can see their share prices grow by huge amounts. To wit, the UFP Technologies, Inc. (NASDAQ:UFPT) share price has soared 445% over five years. This just goes to show the value creation that some businesses can achieve. In more good news, the share price has risen 13% in thirty days. But the price may well have benefitted from a buoyant market, since stocks have gained 13% in the last thirty days.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

Our free stock report includes 2 warning signs investors should be aware of before investing in UFP Technologies. Read for free now.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, UFP Technologies achieved compound earnings per share (EPS) growth of 25% per year. This EPS growth is slower than the share price growth of 40% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that UFP Technologies 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 UFP Technologies stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Investors in UFP Technologies had a tough year, with a total loss of 8.9%, against a market gain of about 13%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 40% 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. It's always interesting to track share price performance over the longer term. But to understand UFP Technologies better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for UFP Technologies you should know about.

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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.