Supply chain disruptions are anticipated to persist this year, resulting in hampered growth in the industrial packaging sector. Given this scenario, it could be wise to avoid struggling industrial packaging stocks UFP Technologies, Inc. (UFPT) and Cryoport, Inc. (CYRX), which exhibit fundamental weakness and bleak growth prospects. Let’s discuss this in detail.
The industrial packaging sector has witnessed immense growth over the past few years, driven by growing demand from end-user industries, rapid urbanization, an increase in modern retailing, a significant surge in e-commerce, and globalization. In addition to ensuring the safety and protection of goods from damage and contamination, several companies use industrial packaging to advertise and brand their products.
However, lingering supply chain disruptions are hampering the sector’s growth. The global supply chain has been in crisis since the COVID-19 pandemic. A combination of factors, including geopolitical unrest, understaffing, and congested shipping ports, are mainly responsible for ongoing supply chain issues.
Navigating the supply chain crisis means facing various challenges, including shortages of packaging materials, increased costs, longer lead times and delays, and logistical constraints. Labor shortages and over-ordering by retailers, manufacturers, and consumers have exacerbated the situation.
According to a recent survey by Gartner, 76% of supply chain executives reported that their companies are experiencing disruptions more frequently than they did three years ago. Meanwhile, shipment delays between China and major ports in the United States and Europe have quadrupled since March last year.
Investors’ lack of interest in industrial packaging stocks is evident from the S&P 500 Containers & Packaging Industry Index’s 7.9% decline over the past three months.
Let’s take a closer look at the fundamentals of CYRX and UFPT to understand why they are best avoided now:
UFP Technologies, Inc. (UFPT)
UFPT designs, engineers, and manufactures solutions for medical devices, sterile packaging, and other engineered products. Its single-use and single-patient devices and components are utilized in various medical applications, including minimally invasive surgery, wound care, and infection prevention.
In terms of forward non-GAAP P/E, UFPT is trading at 32.06x, 59% higher than the industry average of 20.16x. The stock’s forward EV/EBITDA of 18.82x is 39.5% higher than the industry average of 13.50x. Also, its forward Price/Book of 3.75 compares with the 2.79x industry average.
For the fiscal year that ended on December 31, 2022, UFPT’s cost of sales increased 57.1% year-over-year to $67.96 million. Its interest expenses significantly rose from the year-ago value to $872 thousand. Furthermore, as of December 31, 2022, the company’s cash and cash equivalents stood at $4.45 million, compared to $11.12 million as of December 31, 2021.
Analysts expect UFPT’s EPS to decline 11.1% year-over-year to $1.04 for the second quarter ending June 2023. The company’s revenue for the current quarter is expected to come in at $90.55 million, down 4% year-over-year.
In addition, the company’s EPS and revenue for the next fiscal quarter ending September 2023 are expected to decline 55.9% and 4.9% year-over-year to $1.13 and $92.20 million, respectively. The stock has marginally gained intra-day to close the last trading session at $139.13.
UFPT’s weak fundamentals are reflected in its POWR Ratings. It has an overall D rating, equating to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an F grade for Value and a D for Stability and Quality. It is ranked #20 out of 22 stocks within the Industrial - Packaging industry.
Click here to see the other ratings of UFPT (Growth, Sentiment, and Momentum).
Cryoport, Inc. (CYRX)
CYRX provides integrated temperature-controlled supply chain solutions for the life sciences industry. Its offerings cater to the biopharma/pharma, animal health, and reproductive medicine markets and are available under various brands, such as Cryoport Systems, IntegriCell, CryoStork, MVE Biological Solutions, and CRYOPDP.
In terms of forward EV/EBITDA, CYRX is trading at 60.86x, 350.9% higher than the industry average of 13.50x. Likewise, the stock’s forward Price/Cash Flow of 1,061x compares with the 16.06x industry average.
For the fourth quarter ended December 31, 2022, CYRX’s cost of revenues increased 2.3% year-over-year to $34.08 million. Its total operating costs increased 18.5% from the year-ago value to $37.31 million. Also, the company registered a net loss and loss per share of $9.44 million and $0.24 for the same period, respectively.
In addition, as of December 31, 2022, CYRX’s cash and cash equivalents stood at $36.60 million, compared to $139.10 million as of December 31, 2021.
Analysts expect CYRX to report a loss per share of $0.79 for the fiscal year ending December 2023. Similarly, the company’s loss per share is expected to come in at $0.71 for the next fiscal year ending December 2024. Moreover, the company missed the consensus EPS estimates in three of four trailing quarters, which is disappointing.
Shares of CYRX have plunged 23.8% over the past six months to close the last trading session at $21.22.
CYRX’s bleak outlook is reflected in its overall D rating, equating to a Sell in our POWR Ratings system. It has a D grade for Sentiment, Value, and Stability. The stock is ranked #21 within the same industry.
In addition to the POWR Ratings I’ve just highlighted, you can see CYRX’s Growth, Quality, and Momentum ratings here.
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UFPT shares were trading at $138.68 per share on Tuesday morning, down $0.45 (-0.32%). Year-to-date, UFPT has gained 17.64%, versus a 7.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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