Knobias Clip Report (11-27-2007)

Submitted By Knobias ClipReport

UFPT: Specialty Packaging Is Becoming Big Business

Wednesday’s session saw the bulls out in full force as the Dow’s two day run has added back some 500 points back to the index in the face of weak economic data. Some pegged the rally as a short covering while others noted the fall in oil and in the increase in energy inventories as the cause. Either way, there wasn’t much good news minus the energy inventory report and depending on which theory subscribed: another possibility of Fed interest rate cut.

The possibility of the cut had analysts on each side of the fence clamoring and debating on which course of action would be wiser. One side pointed out the rising LIBOR rate and the fact that rate cuts aren’t helping the problem; hence they should be halted for fear of increased inflation in the long term. The other side noted the market’s two day rally which was in response to an increasing possibility of a rate cut, and the fact that additional cuts could continue to ease the credit problems.

Either way, the Dow saw a 300 point rally on the day with cheaper oil, gold, and all 30 stocks on the index seeing gains.

In the small cap space, the Bidz.com drama continued with many analysts coming out in its defense noting that the questions it had regarding inventory and cash levels had been answered. Citron responded with its second report highlighting many instances of what it termed as fake bidding by insider’s or somebody with a stake in the company. The culmination was another down day for the name as shares lost another 15% on 11.5 million shares traded.

Another company that might warrant another look in the small cap space could be UFP Technolgies Inc. (UFPT). The Company is a leading designer and manufacturer of interior protective packaging solutions using molded fiber, vacuum-formed plastics, and molded and fabricated foam plastics. The Company also designs and manufactures engineered component solutions using laminating, molding, and fabricating technologies. The Company primarily serves the automotive, computers and electronics, medical, aerospace and defense, consumer, and industrial markets.

Specialty packaging is a big business and has been growing for some time now. The Company recently released their third quarter numbers which solidified that thought.

Sales for the quarter were $22.9 million or 5.5% higher than 2006 third quarter sales of $21.7 million. Net income was reported at $883,000 or $0.15 per diluted common share outstanding for the third quarter which was more than double the Company's net income of $396,000 or $0.07 per diluted common share outstanding for the third quarter of 2006. Add to it that the Company’s cash level was $5.5 million with declining debt and one can easily see that the balance sheet is beginning to show signs of some possible leveraging. And that may be what the Company does in the coming months.

Noted R. Jeffrey Bailly, Chairman, CEO, and President in the Company’s earnings release, “This (strengthening balance sheet) gives us a solid platform to grow through acquisition, invest in new technologies, and develop new products. All these factors make us very optimistic about the future of UFP Technologies.”

If the Company meets analyst expectations for the year of 57c, their price to earnings ratio comes in at nearly 11. With an expectation of 74c next year from analysts, the Company is trading at only a forward price to earnings ratio of 8.45. With these types of P/E’s, investors would be wise to watch.



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