Encore Wire

Stock: WIRE

Rating: Strong Buy

Author: Waleed M. Tariq

Overview

  • Encore, a wire and cable maker, gained 51% in 52 weeks after the 2021 copper price hike.
  • It has a robust balance sheet, good financial indicators, and an inexpensive share price.

Bullish

  • Manufacturing and operations are invested in to grow volume, market share, and price reliance.
  • Despite solid fundamentals, the stock is discounted.
  • I like the stock’s solid fundamentals, strong market outlook, and affordable pricing.

Bearish

  • Copper price drops could lead the company to slash wire prices, hurting top-line growth.

Industry optimism

  • Copper wire and cable will reach $267 billion to $300 billion by 2030, according to Allied Industry Research and Fortune Business Insights.
  • Global Market Insights predicts that the North American wire & cable sector will reach $44.5 billion by 2027, a CAGR of 6%.
  • Encore’s diverse product line meets expanding demand in various industries, including low voltage, where it has a 9.9% TTM market share in Q1 2022.

Profitable growth

  • In 2021 and Q1 2022, the corporation has increased. Copper unit volumes and spreads climbed 8.6% and 86.1% in the MRQ, above the industry CAGR.

Copper price risk

  • A dip in copper prices could compel the company to cut copper wire prices, reducing revenue.
IMF Copper Price Forecast
Knoema
World Bank Copper Price Forecast
Knoema

Valuation

  • Almost every relative value parameter is below the 5-year average and industry median. All three financial indicators give WIRE a 50% upside of $195.
WIRE Valuation Summary
Seeking Alpha

Conclusion

  • Despite short-term copper price worries, the company offers long-term investors a discount on a winning investment.