Encore Wire - Aggressive Growth

Encore Wire Corp (WIRE) saw its top line swell last quarter thanks to both rising prices and volume. Earnings have turned around and estimates are on the rise.

This Zacks #1 Rank (Strong Buy) also boasts a rock-solid balance sheet and has plenty of upside.

Company Description

Encore Wire manufactures a broad range of copper electrical wire for interior wiring in homes, apartments, manufactured housing and commercial and industrial buildings.

Sales Spike 45%

On Feb 22 Encore Wire reported its fourth-quarter results that showed a 45% top-line growth, to $256 million, up from $177 million a year ago. The bulk of that improvement was due to a 36% surge in pricing, but unit sales were up 6% as well. Copper was up 31% in that span, so it looks like the company has no trouble passing input costs onto customers.

Encore Wire’s bottom line showed a nice turn around, posting a $4.5 million profit, up from a $1.9 million loss. Earnings per share came out to $0.19, beating expectations by 3 cents and up from an 8-cent loss a year ago.

Great Balance Sheet

Not only has the company managed to build up over $100 million in cash, as of the end of 2010, but they also have no long-term debt. Additionally, their revolving credit was entirely paid off.

Analysts Like What They See

The Zacks Consensus Estimate for full-year 2011 is up 14 cents, to $1.26 on the earnings news. Next year’s average forecast rose 11 cents, to $1.60. Given the $0.66 earned in 2010, projected growth rates are now 91% and 27%, respectively.

Valuations are looking good as well. Shares are trading at 0.6 times sales and 1.4 times book value. Earnings multiples are not too bad either. The forward P/E is about 19 times and the PEG ration is coming in at 1.4.

The Chart

Shares of WIRE were in a rut until recently. But the tides have shifted and shares are on a clear move higher. Given the optimism in the ongoing recovery there should be plenty more room to the upside.

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