NEW YORK (TheStreet) -- Encore Wire Corporation (Nasdaq:WIRE) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and feeble growth in the company's earnings per share. Highlights from the ratings report include:
- WIRE has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 7.44, which clearly demonstrates the ability to cover short-term cash needs.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Electrical Equipment industry. The net income has significantly decreased by 37.2% when compared to the same quarter one year ago, falling from $10.65 million to $6.69 million.
- The gross profit margin for ENCORE WIRE CORP is currently extremely low, coming in at 10.00%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.40% trails that of the industry average.
-- Written by a member of TheStreet Ratings Staff
TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
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