Tech World: Encore Wire Gathering Earnings Momentum
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November 11, 2008
Encore Wire (WIRE) manufactures copper electrical building wire and cable in the United States. It supplies residential wire for interior electrical wiring in homes, apartments, and manufactured housing; and commercial wire for electrical distribution in commercial and industrial buildings. Encore Wire offers its residential wire and commercial wire to wholesale electrical distributors, as well as to retail home improvement centers. It sells its products primarily through manufacturer’s representatives, as well as through its own direct in-house marketing forces to a lesser extent. The company was founded in 1989 and is based in McKinney, Texas.
Encore''s expansive, state-of-the-art warehouse facilities allow them to maintain inventory levels that are broad and deep, which instills great consumer confidence. The company has the highest order fill rate in the industry while rapidly handling customer inquiries, orders, and shipments.
The company has a good fundamental profile with solid cash flow and the earnings momentum is starting to gain steam. Net income for the third quarter of 2008 increased 40 percent to $8.1 million versus $5.8 million in the third quarter of 2007. Fully diluted net earnings per common share were $0.34 in the third quarter of 2008 versus $0.24 in the third quarter of 2007.
On a sequential quarter comparison, net sales for the third quarter of 2008 were $296.3 million versus $322.8 million during the second quarter of 2008. Net income for the third quarter of 2008 increased 507 percent to $8.1 million versus $1.3 million in the second quarter of 2008. Fully diluted net income per common share was $0.34 in the third quarter of 2008 versus $0.06 in the second quarter of 2008
The stock is showing a potential Elliot Wave-5 buy, projecting gains into the $20.81 per share area over the next few months. Encore does have an options market that currently extends out to May of 2009 allowing the trader enough time to take advantage of the forecasted opportunity using options.
Figure 1: Daily Elliott Wave-5 Buy Pattern for Encore Wire
(Source: Profit Source)
click here for larger view
Happy Trading.
Jeff Neal
Senior Writer, Options Strategist & Profit Strategies Radio Show Market Correspondent
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