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Shareholders in Encore Wire Corporation (NASDAQ:WIRE) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects.
After this upgrade, Encore Wire's twin analysts are now forecasting revenues of US$1.6b in 2021. This would be a sizeable 23% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to accumulate 4.1% to US$3.85. Prior to this update, the analysts had been forecasting revenues of US$1.4b and earnings per share (EPS) of US$2.95 in 2021. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
It will come as no surprise to learn that the analysts have increased their price target for Encore Wire 11% to US$75.00 on the back of these upgrades. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Encore Wire analyst has a price target of US$80.00 per share, while the most pessimistic values it at US$70.00. This is a very narrow spread of estimates, implying either that Encore Wire is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting Encore Wire's growth to accelerate, with the forecast 23% annualised growth to the end of 2021 ranking favourably alongside historical growth of 6.2% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 11% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Encore Wire to grow faster than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Encore Wire could be worth investigating further.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for Encore Wire going out as far as 2022, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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. 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.
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