Today I will take a look at UFP Technologies Inc’s (NASDAQ:UFPT) most recent earnings update (30 September 2017) and compare these latest figures against its performance over the past few years, as well as how the rest of the packaging industry performed. As an investor, I find it beneficial to assess UFPT’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. See our latest analysis for UFP Technologies
Was UFPT’s recent earnings decline worse than the long-term trend and the industry?
I prefer to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This technique enables me to analyze many different companies in a uniform manner using new information. For UFP Technologies, its latest earnings (trailing twelve month) is US$7.99M, which, against the previous year’s figure, has declined by -2.07%. Given that these figures may be somewhat nearsighted, I have determined an annualized five-year figure for UFP Technologies’s net income, which stands at US$9.34M This doesn’t look much better, as earnings seem to have gradually been falling over time.Why is this? Well, let’s look at what’s occurring with margins and whether the whole industry is facing the same headwind. Revenue growth in the past few years, has been positive, yet earnings growth has been deteriorating. This suggest that UFP Technologies has been increasing expenses, which is hurting margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the US packaging industry has been growing, albeit, at a muted single-digit rate of 6.25% over the past year, and 5.37% over the previous five years. This means that any tailwind the industry is benefiting from, UFP Technologies has not been able to realize the gains unlike its average peer.
What does this mean?
UFP Technologies’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Generally companies that endure an extended period of reduction in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the recent industry disruption and growth. I recommend you continue to research UFP Technologies to get a more holistic view of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for UFPT’s future growth? Take a look at our free research report of analyst consensus for UFPT’s outlook.
- 2. Financial Health: Is UFPT’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.