United Parcel Service has gotten torched over the last six months - since March 2025, its stock price has dropped 23.6% to $83.99 per share. This might have investors contemplating their next move.

Is now the time to buy United Parcel Service, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Do We Think United Parcel Service Will Underperform?

Even with the cheaper entry price, we don't have much confidence in United Parcel Service. Here are three reasons you should be careful with UPS and a stock we'd rather own.

1. Demand Slips as Sales Volumes Slide

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful Air Freight and Logistics company because there’s a ceiling to what customers will pay.

United Parcel Service’s units sold came in at 1.26 billion in the latest quarter, and they averaged 3.4% year-on-year declines over the last two years. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests United Parcel Service might have to lower prices or invest in product improvements to grow, factors that can hinder near-term profitability.

2. EPS Growth Has Stalled

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

United Parcel Service’s flat EPS over the last five years was below its 3.1% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

3. New Investments Fail to Bear Fruit as ROIC Declines

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, United Parcel Service’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Final Judgment

We see the value of companies helping their customers, but in the case of United Parcel Service, we’re out. Following the recent decline, the stock trades at 11.4× forward P/E (or $83.99 per share). While this valuation is reasonable, we don’t see a big opportunity at the moment. There are better investments elsewhere. We’d recommend looking at one of our top digital advertising picks.

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