UFP Technologies (UFPT)

Medical products company UFP Technologies (NASDAQ:UFPT) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 6.5% year on year to $154.6 million. Its non-GAAP profit of $2.39 per share was 10% above analysts’ consensus estimates.

Company Overview

With expertise dating back to 1963 in specialized materials and precision manufacturing, UFP Technologies (NASDAQ:UFPT) designs and manufactures custom solutions for medical devices, sterile packaging, and other highly engineered products for healthcare and industrial applications.

Companies specializing in drug development inputs and services play a crucial role in the pharmaceutical and biotechnology value chain. Essential support for drug discovery, preclinical testing, and manufacturing means stable demand, as pharmaceutical companies often outsource non-core functions with medium to long-term contracts. However, the business model faces high capital requirements, customer concentration, and vulnerability to shifts in biopharma R&D budgets or regulatory frameworks. Looking ahead, the industry will likely enjoy tailwinds such as increasing investment in biologics, cell and gene therapies, and advancements in precision medicine, which drive demand for sophisticated tools and services. There is a growing trend of outsourcing in drug development for nimbleness and cost efficiency, which benefits the industry. On the flip side, potential headwinds include pricing pressures as efforts to contain healthcare costs are always top of mind. An evolving regulatory backdrop could also slow innovation or client activity.

UFP Technologies competes with diversified medical component manufacturers like Integer Holdings (NYSE:ITGR), Nordson Medical (part of Nordson Corporation, NASDAQ:NDSN), and privately-held companies such as Viant Medical and Medbio in the medical device solutions space.

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 $598 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.

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, UFP Technologies’s sales grew at an exceptional 26.5% compounded annual growth rate over the last five years. Its growth beat the average healthcare company and shows its offerings resonate with customers.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. UFP Technologies’s annualized revenue growth of 23.9% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, UFP Technologies reported year-on-year revenue growth of 6.5%, and its $154.6 million of revenue exceeded Wall Street’s estimates by 3.3%.

Looking ahead, sell-side analysts expect revenue to grow 6.8% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is above average for the sector and indicates the market sees some success for its newer products and services.

UFP Technologies has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 14.7%, higher than the broader healthcare sector.

Analyzing the trend in its profitability, UFP Technologies’s operating margin rose by 4.7 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q3, UFP Technologies generated an operating margin profit margin of 15.1%, down 2.6 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

UFP Technologies’s EPS grew at an astounding 37.1% compounded annual growth rate over the last five years, higher than its 26.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into UFP Technologies’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, UFP Technologies’s operating margin declined this quarter but expanded by 4.7 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q3, UFP Technologies reported adjusted EPS of $2.39, in line with the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects UFP Technologies’s full-year EPS of $9.82 to grow 8.4%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

UFP Technologies has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 7.8% over the last five years, slightly better than the broader healthcare sector.

Taking a step back, we can see that UFP Technologies’s margin expanded by 3 percentage points during that time. This is encouraging because it gives the company more optionality.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although UFP Technologies hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked. Its five-year average ROIC was 13.6%, higher than most healthcare businesses.

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. Fortunately, UFP Technologies’s has increased over the last few years. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

UFP Technologies reported $18.23 million of cash and $146.1 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $123.2 million of EBITDA over the last 12 months, we view UFP Technologies’s 1.0× net-debt-to-EBITDA ratio as safe. We also see its $6.47 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing UFP Technologies beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this was a solid print. The stock remained flat at $200 immediately after reporting.

Updated: December 4, 2025 at 10:20 PM EST

Are you wondering whether to buy UFP Technologies or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

UFP Technologies isn’t a bad business, but we’re not clamoring to buy it here and now. First off, its revenue growth was exceptional over the last five years. And while UFP Technologies’s subscale operations give it fewer distribution channels than its larger rivals, its rising cash profitability gives it more optionality.

UFP Technologies’s P/E ratio based on the next 12 months is 21.8x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $329.50 on the company (compared to the current share price of $217.64).