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$21.07 -0.32 (-1.50%)
7/3/2008 1:00 PM

Encore Wire Corp (WIRE)

CAPS Rating:
****

Low-cost manufacturer of copper electrical building wire and cable. It supplies residential wire for interior wiring in homes, apartments and manufactured housing, and commercial wire for electrical distribution in commercial and industrial buildings.

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Avatar DavidBear (< 20) Submitted: 5/14/07 2:41 AM : Underperform Start Price: $29.33 WIRE Score: 11.89

This is a Cyclical company. As such, metrics like PE are not necessarily a good way to value the stock. If someone knows a reason why this is no longer a cyclical stock, I'd love to hear it. Based on historical price growth (looking at the lows from may 1993 to may 2005, shows a growth rate of about 12.5%) I think that the underlying bottom for this stock is around $12.30 today, and I don't expect that the underlying support curve will rise to today's price levels in less than 9.5 years.

According to Yahoo!, the two analysts have widely divergent opinions, especial about next years earnings. The bear-analyst feels that earnings will be about $1.70, which when given a multiple of 15 says the stock will be worth $25. The bull-analyst feels that next years earnings will be about $2.48, which means that at that time, the stock will be worth $37. That is a rise of about 11%/year if the optimistic analyst is correct.

I'm not saying that this stock will not continue to rise over the short-run, but I think in the long run it is unlikely to beat the market from this price.

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