Yahoo Finance Is Now The Time To Put Ultra Clean Holdings (NASDAQ:UCTT) On Your Watchlist?
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
In contrast to all that, I prefer to spend time on companies like Ultra Clean Holdings (NASDAQ:UCTT), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
Check out our latest analysis for Ultra Clean Holdings
How Fast Is Ultra Clean Holdings Growing Its Earnings Per Share?
In the last three years Ultra Clean Holdings's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Ultra Clean Holdings boosted its trailing twelve month EPS from US$2.30 to US$2.71, in the last year. I doubt many would complain about that 18% gain.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Ultra Clean Holdings maintained stable EBIT margins over the last year, all while growing revenue 49% to US$2.2b. That's progress.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of Ultra Clean Holdings's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Ultra Clean Holdings Insiders Aligned With All Shareholders?
It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Ultra Clean Holdings insiders have a significant amount of capital invested in the stock. To be specific, they have US$28m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 1.9% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Should You Add Ultra Clean Holdings To Your Watchlist?
One positive for Ultra Clean Holdings is that it is growing EPS. That's nice to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. We should say that we've discovered 3 warning signs for Ultra Clean Holdings that you should be aware of before investing here.
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
