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