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"We rate ENCORE WIRE CORP (WIRE) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. 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, disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 4.81, which clearly demonstrates the ability to cover short-term cash needs.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.9%. Since the same quarter one year prior, revenues slightly dropped by 4.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for ENCORE WIRE CORP is currently extremely low, coming in at 12.74%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.72% trails that of the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Electrical Equipment industry and the overall market, ENCORE WIRE CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: WIRE Ratings Report