Over the past six months, UFP Technologies’s stock price fell to $239.81. Shareholders have lost 12.6% of their capital, which is disappointing considering the S&P 500 has climbed by 5.8%. This may have investors wondering how to approach the situation.
Is now the time to buy UFP Technologies, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is UFP Technologies Not Exciting?
Even though the stock has become cheaper, we're swiping left on UFP Technologies for now. Here are one reason why we avoid UFPT and a stock we'd rather own.
Fewer Distribution Channels Limit its Ceiling
Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.
With just $547.6 million in revenue over the past 12 months, UFP Technologies is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.
Final Judgment
UFP Technologies isn’t a terrible business, but it doesn’t pass our bar. After the recent drawdown, the stock trades at 26.9× forward P/E (or $239.81 per share). This valuation tells us a lot of optimism is priced in - you can find more timely opportunities elsewhere. We’d recommend looking at the Amazon and PayPal of Latin America.
Stocks We Like More Than UFP Technologies
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