Encore Wire Corp (WIRE)

crazykling (96.81) Submitted: 2/24/07 9:36 AM : Start Price: $27.72 WIRE Score: -11.05

*gravityproof* has also got some good ideas on valuation.

My two cents:

WIRE: P/B 1.9, P/E 5.5ish. Recent, about 40% off peaks, recent insider buying(perhaps not significant), small market cap 560M.

Copper Wire industry focusing on residential and commercial.

1/3 of the business is residential. This part of the business has to be going down.
2/3 of the business is commercial. I'm in commercial construction and the general consensus is this is just about the busiest it's ever been. Not only that all teh engineers I work with are begging me for any engineers they can hire. Why is that important? when an engineer is designing a job, ground usually doesn't break until there about done, and a typical building takes 18 to 48 months to build. Business will be good for the next two years. This explains why their revenue is up.

So, revenue is trending up because commercial business is doing very well, but last Q their profit dropped from some 36M to 6M from same time last year. Why? Copper prices went down from about 3.5 to 2.5. The Inventory of this 600M business is about 100M, wo what do you think that does to value of inventory + they now have to sell copper for less than they bought it for which is anothe rreason why profit is up.

I think you can count on revenue for this company to continue upward. But if prices stabilize or go up so will stock price. copper is tending up over the last couple months: http://www.alanwire.com/cop1.html. But check out the historical It's still at an all time high.

So will prices drop further, if so than the price may drop, but I think it will only be temporary, perhaps a few quarters and it looks like that's mostly priced in.

If copper maintains or goes up stock should do fine.

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