Key Points
UFP Technologies grew sales and adjusted earnings per share by 15% and 17% in the second quarter.
This was even though its largest product category -- robotic surgery drapes -- was largely flat.
UFP remains a reasonably priced, top-tier compounder in my opinion, thanks to its acquisitive strategy.
UFP Technologies (NASDAQ: UFPT) is a contract developer and manufacturer of specialized healthcare products, and its shares are soaring 24% higher today as of 2 p.m. ET after the company reported excellent second-quarter earnings. UFP Technologies soared past Wall Street's expectations, and the stock is now up 49% in 2026.
During Q2, UFP:
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- grew sales by 15%, despite its largest segment, robotic drapes, largely seeing flat sales growth
- saw adjusted earnings per share rise 17%
- recorded a 15% increase in sales to its five largest customers
- delivered 20% revenue growth from its core medtech unit
- generated organic sales growth of 12%
- continues to monitor five to ten tuck-in acquisition opportunities
While management didn't provide guidance for 2026, the quarter was thoroughly excellent. UFP serves niche medical OEMs (original equipment manufacturers), focusing on product lines that are primarily single-use. A perfect example of this is the company's leadership in making the drapes that cover the equipment during robot-assisted surgeries. UFP collects new niche product offerings through a serial acquisition strategy, and Q2's results show that this game plan is still working well.
Image source: Getty Images.
Management had previously guided for revenue growth between 12% and 18% over the next three to five years, with an equal mix of this increase coming from organic and M&A-aided expansion. Hence, Q2's results fit this framework. Although UFP is a small-cap stock, it works with 26 of the top 30 medical OEMs and largely gets to handpick which product ideas it pursues with its medtech customers, often choosing the highest-profit opportunities. The company's access to certain exclusive materials and its manufacturing prowess make it indispensable to these OEMs.
Trading at 30 times free cash flow following its recent rise, UFP isn't as "cheap" as it previously was, but it isn't outrageously priced given the growth potential of its largest sales segment, robotic drapes. In my view, UFP Technologies remains a top-tier compounder with multibagger potential over the long haul, and Q2's results reinforced that.
Josh Kohn-Lindquist has positions in UFP Technologies. The Motley Fool recommends UFP Technologies. The Motley Fool has a disclosure policy.