Wire isn’t the most exciting product out there, but it is pretty essential – you can’t build a modern buildings or machinery without it, and Encore Wire (NASDAQ:WIRE) operates an efficient business that prioritizes high levels of customer service. The long-term growth rates haven’t been uniformly impressive, and Encore Wire’s fortunes are inextricably linked to the price of copper, but the shares have outperformed the broader industrial sector since my last update (helped by a big run after the last quarter) and have likewise held their own against other industrials over the past decade.
Given the huge influence of copper prices on Encore’s financials, modeling is even more challenging than usual. While Encore should be leveraged to improving wiring demand as factories and warehouses automate, commercial and institutional buildings migrate toward more modern HVAC and building control systems, and investments continue in data centers and renewable energy, copper prices are likely going to dominate the story.
I think you can make an argument for Encore shares still having some upside at today’s price, but the long-term history is what it is. Encore has a strong track record of growing book value per share, but this is a commodity-driven name and those are often tough places to make long-term returns, particularly when you buy into what looks like a new long-term peak.
Follow this link to the full article:
Encore Wire Setting New Records On The Back Of Exceptional Copper Spreads
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