Encore Wire Corporation (NASDAQ:WIRE) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance. Investors have been pretty optimistic on Encore Wire too, with the stock up 17% to US$80.00 over the past week. We'll be curious to see if these new estimates convince the market to lift the stock price higher still.
After this upgrade, Encore Wire's two analysts are now forecasting revenues of US$2.3b in 2021. This would be a substantial 21% improvement in sales compared to the last 12 months. Per-share earnings are expected to expand 19% to US$15.53. Prior to this update, the analysts had been forecasting revenues of US$1.8b and earnings per share (EPS) of US$5.79 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 24% to US$113 per share. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Encore Wire at US$115 per share, while the most bearish prices it at US$110. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Encore Wire is an easy business to forecast or the underlying assumptions are obvious.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Encore Wire's past performance and to peers in the same industry. It's clear from the latest estimates that Encore Wire's rate of growth is expected to accelerate meaningfully, with the forecast 47% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 8.6% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 10% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Encore Wire to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Encore Wire.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At least one analyst has provided forecasts out to 2022, which can be seen for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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