Encore Wire (WIRE) Hits Fresh High: Is There Still Room to Run?

Shares of Encore Wire (WIRE) have been strong performers lately, with the stock up 41% over the past month. The stock hit a new 52-week high of $136.69 in the previous session. Encore Wire has gained 121.3% since the start of the year compared to the 13.1% move for the Zacks Industrial Products sector and the 94.3% return for the Zacks Wire and Cable Products industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 26, 2021, Encore Wire reported EPS of $8.51 versus consensus estimate of $2.82.

Valuation Metrics

While Encore Wire has moved to its 52-week high in the recent past, investors need to be asking, what is next for the company? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Encore Wire has a Value Score of B. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 6.2X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 29X versus its peer group's average of 11.6X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Encore Wire currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Encore Wire passes the test. Thus, it seems as though Encore Wire shares could have a bit more room to run in the near term.

How Does Encore Wire Stack Up to the Competition?

Shares of Encore Wire have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Andritz (ADRZY), Horiba (HRIBF), and Avery Dennison (AVY), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

The Zacks Industry Rank is in the top 3% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Encore Wire, even beyond its own solid fundamental situation.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.