Stock Analysis

The total return for Encore Wire (NASDAQ:WIRE) investors has risen faster than earnings growth over the last five years

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NasdaqGS:WIRE
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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term Encore Wire Corporation (NASDAQ:WIRE) shareholders would be well aware of this, since the stock is up 196% in five years. It's also good to see the share price up 15% over the last quarter.

In light of the stock dropping 3.1% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, Encore Wire managed to grow its earnings per share at 74% a year. The EPS growth is more impressive than the yearly share price gain of 24% over the same period. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 3.68.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
NasdaqGS:WIRE Earnings Per Share Growth December 8th 2022

We know that Encore Wire has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Encore Wire stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's good to see that Encore Wire has rewarded shareholders with a total shareholder return of 7.6% in the last twelve months. And that does include the dividend. However, the TSR over five years, coming in at 24% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand Encore Wire better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Encore Wire you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Valuation is complex, but we're helping make it simple.

Find out whether Encore Wire is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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