The share of UFP Technologies (NAS: UFPT, 30 years Financials) is considered to be significantly overvalued, according to the calculation of GuruFocus Value. The GuruFocus Value is GuruFocus’s estimate of the fair value at which the stock is to trade. It is calculated based on the historical multiples at which the stock has traded, past business growth, and analysts’ estimates of future business performance. If a share’s price is significantly above the GF value line, it is overvalued and its future performance may be poor. On the other hand, if it is significantly below the GF value line, its future return is likely to be higher. At its current price of $ 61.03 per share and market cap of $ 459.3 million, UFP Technologies stock would be significantly overvalued. The GF value for UFP Technologies is shown in the table below.
As UFP Technologies is significantly overvalued, its long-term stock return is likely to be much lower than the future growth of its business, which has averaged 5.6% over the past three years and is expected to grow by 2.40 % per year over the next three to five years. years.
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It is always important to check the financial strength of a company before buying its shares. Investing in companies with low financial strength presents a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a business. UFP Technologies has a cash-to-debt ratio of 11.22, which is over 85% of companies in the packaging and container industry. The overall financial strength of UFP Technologies is 9 out of 10, indicating that the financial strength of UFP Technologies is strong. Here is UFP Technologies’ debt and cash flow over the past few years:
It is less risky to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A business with high profit margins is also generally a safer investment than a business with low profit margins. UFP Technologies has been profitable 10 in the past 10 years. In the past twelve months, the company achieved sales of $ 179.7 million and earnings of $ 1.81 per share. His the operating margin is 9.69%, which ranks better than 66% of companies in the packaging and container industry. Overall, GuruFocus ranks UFP Technologies’ profitability at 7 out of 10, indicating fair profitability. Here is the turnover and net income of UFP Technologies over the past few years:
One of the most important factors in the valuation of a business is growth. Long-term stock performance is closely linked to growth, according to GuruFocus research. Companies that grow faster create more shareholder value, especially if that growth is profitable. UFP Technologies’ average annual revenue growth is 5.6%, which ranks better than 69% of companies in the packaging and container industry. The 3-year average EBITDA growth is 10.8%, which ranks better than 66% of companies in the packaging and container industry.
Another way to look at a company’s profitability is to compare its return on invested capital and the weighted cost of capital. Return on invested capital (ROIC) The extent to which a business 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 should pay on average to all of its security holders to finance its assets. We want to have a return on invested capital greater than the weighted cost of capital. For the last 12 months, the return on invested capital of UFP Technologies is 8.22 and its cost of capital is 7.76. The historical ROIC vs WACC comparison of UFP technologies is shown below:
In summary, the stock of UFP Technologies (NAS: UFPT, 30 years Financials) is estimated to be significantly overvalued. The company’s financial position is solid and its profitability is fair. Its growth ranks better than 66% of companies in the packaging and container industry. To find out more about the UFP Technologies share, you can consult its financial data over 30 years here.
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