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Should You Buy Encore Wire Corporation (NASDAQ:WIRE) At US$050.1?

Encore Wire Corporation (NASDAQ:WIRE), a electrical company based in United States, received a lot of attention from a substantial price movement on the NasdaqGS over the last few months, increasing to $58 at one point, and dropping to the lows of $46.2. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Encore Wire’s current trading price of $50.1 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Encore Wire’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View out our latest analysis for Encore Wire

What is Encore Wire worth?

According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 16.09x is currently trading slightly below its industry peers’ ratio of 17.75x, which means if you buy Encore Wire today, you’d be paying a reasonable price for it. And if you believe Encore Wire should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Encore Wire’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Encore Wire generate?

NasdaqGS:WIRE Future Profit June 23rd 18
NasdaqGS:WIRE Future Profit June 23rd 18

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Though in the case of Encore Wire, it is expected to deliver a negative earnings growth of -6.35%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? WIRE seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on WIRE, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on WIRE for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on WIRE should the price fluctuate below its true value.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Encore Wire. You can find everything you need to know about Encore Wire in the latest infographic research report. If you are no longer interested in Encore Wire, you can use our free platform to see my list of over 50 other stocks with a high growth potential.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.

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