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Does Encore Wire Corporation’s (NASDAQ:WIRE) Recent Track Record Look Strong?

Simply Wall St

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When Encore Wire Corporation (NASDAQ:WIRE) released its most recent earnings update (31 December 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Encore Wire’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not WIRE actually performed well. Below is a quick commentary on how I see WIRE has performed.

View our latest analysis for Encore Wire

How Well Did WIRE Perform?

WIRE’s trailing twelve-month earnings (from 31 December 2018) of US$78m has jumped 17% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 12%, indicating the rate at which WIRE is growing has accelerated. What’s the driver of this growth? Well, let’s take a look at whether it is merely owing to an industry uplift, or if Encore Wire has experienced some company-specific growth.

NasdaqGS:WIRE Income Statement, March 26th 2019

In terms of returns from investment, Encore Wire has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. However, its return on assets (ROA) of 9.3% exceeds the US Electrical industry of 8.2%, indicating Encore Wire has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Encore Wire’s debt level, has increased over the past 3 years from 13% to 13%.

What does this mean?

Encore Wire’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Encore Wire has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Encore Wire to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for WIRE’s future growth? Take a look at our free research report of analyst consensus for WIRE’s outlook.
  2. Financial Health: Are WIRE’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2018. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.