What Does Encore Wire Corporation's (NASDAQ:WIRE) Share Price Indicate?
Encore Wire Corporation (NASDAQ:WIRE), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. As a US$2.4b market cap stock, it seems odd Encore Wire is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an 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 the opportunity still exists.
Check out our latest analysis for Encore Wire
What is Encore Wire worth?
Great news for investors – Encore Wire is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $163.35, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, Encore Wire’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 does the future of Encore Wire look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Encore Wire, at least in the near future.
What this means for you:
Are you a shareholder? Although WIRE is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to WIRE, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on WIRE for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Our analysis shows 3 warning signs for Encore Wire (2 are significant!) and we strongly recommend you look at these before investing.
If you are no longer interested in Encore Wire, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.
