Encore Wire Current Debt

WIRE Stock  USD 289.40  0.00  0.00%   
Encore Wire holds a debt-to-equity ratio of 0.17. At present, Encore Wire's Short Term Debt is projected to increase significantly based on the last few years of reporting. The current year's Debt To Equity is expected to grow to 0.54, whereas Net Debt To EBITDA is forecasted to decline to (1.22). . Encore Wire's financial risk is the risk to Encore Wire stockholders that is caused by an increase in debt.

Asset vs Debt

Equity vs Debt

Encore Wire's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Encore Wire's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the Company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Encore Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Encore Wire's stakeholders.
For most companies, including Encore Wire, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Encore Wire, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Encore Wire's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Price Book
2.3583
Book Value
114.883
Operating Margin
0.1184
Profit Margin
0.1245
Return On Assets
0.1176
At present, Encore Wire's Liabilities And Stockholders Equity is projected to increase significantly based on the last few years of reporting. The current year's Non Current Liabilities Other is expected to grow to about 63.9 M, whereas Non Current Liabilities Total is forecasted to decline to about 43.9 M.
  
Check out the analysis of Encore Wire Fundamentals Over Time.
For information on how to trade Encore Stock refer to our How to Trade Encore Stock guide.

Encore Wire Financial Rating

Encore Wire financial ratings play a critical role in determining how much Encore Wire have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for Encore Wire's borrowing costs.
Piotroski F Score
6
HealthyView
Beneish M Score
(2.64)
Unlikely ManipulatorView

Encore Wire Debt to Cash Allocation

Many companies such as Encore Wire, eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
Encore Wire currently holds 220.34 M in liabilities with Debt to Equity (D/E) ratio of 0.17, which may suggest the company is not taking enough advantage from borrowing. Encore Wire has a current ratio of 8.37, suggesting that it is liquid enough and is able to pay its financial obligations when due. Note, when we think about Encore Wire's use of debt, we should always consider it together with its cash and equity.

Encore Wire Total Assets Over Time

Encore Wire Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Encore Wire uses debt to finance its assets. It includes both long-term and short-term borrowings maturing within one year. It also includes both tangible and intangible assets, such as goodwill.

Encore Wire Debt Ratio

    
  25.0   
It looks as if most of the Encore Wire's assets are financed through equity. Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the Encore Wire's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Encore Wire, which in turn will lower the firm's financial flexibility.

Encore Short Long Term Debt Total

Short Long Term Debt Total

121.27 Million

At present, Encore Wire's Short and Long Term Debt Total is projected to increase significantly based on the last few years of reporting.

Understaning Encore Wire Use of Financial Leverage

Encore Wire financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Encore Wire's total debt position, including all of outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Encore Wire assets, the company is considered highly leveraged. Understanding the composition and structure of overall Encore Wire debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business and if it is worth investing in it. Financial leverage can amplify the potential profits to Encore Wire's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Encore Wire's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
Last ReportedProjected for Next Year
Short and Long Term Debt Total115.5 M121.3 M
Net Debt-560.6 M-532.6 M
Short Term Debt115.5 M121.3 M
Net Debt To EBITDA(1.16)(1.22)
Debt To Equity 0.29  0.54 
Interest Debt Per Share(2.17)(2.06)
Debt To Assets 0.22  0.25 
Long Term Debt To Capitalization 0.24  0.33 
Total Debt To Capitalization 0.23  0.32 
Debt Equity Ratio 0.29  0.54 
Debt Ratio 0.22  0.25 
Cash Flow To Debt Ratio 0.26  0.25 
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Additional Information and Resources on Investing in Encore Stock

When determining whether Encore Wire is a strong investment it is important to analyze Encore Wire's competitive position within its industry, examining market share, product or service uniqueness, and competitive advantages. Beyond financials and market position, potential investors should also consider broader economic conditions, industry trends, and any regulatory or geopolitical factors that may impact Encore Wire's future performance. For an informed investment choice regarding Encore Stock, refer to the following important reports:
Check out the analysis of Encore Wire Fundamentals Over Time.
For information on how to trade Encore Stock refer to our How to Trade Encore Stock guide.
You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Is Electrical Components & Equipment space expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Encore Wire. If investors know Encore will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Encore Wire listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth
(0.40)
Dividend Share
0.08
Earnings Share
19.04
Revenue Per Share
155.987
Quarterly Revenue Growth
(0.04)
The market value of Encore Wire is measured differently than its book value, which is the value of Encore that is recorded on the company's balance sheet. Investors also form their own opinion of Encore Wire's value that differs from its market value or its book value, called intrinsic value, which is Encore Wire's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Encore Wire's market value can be influenced by many factors that don't directly affect Encore Wire's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Encore Wire's value and its price as these two are different measures arrived at by different means. Investors typically determine if Encore Wire is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Encore Wire's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.

What is Financial Leverage?

Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.

Leverage and Capital Costs

The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.

Benefits of Financial Leverage

Leverage provides the following benefits for companies:
  • Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
  • It provides a variety of financing sources by which the firm can achieve its target earnings.
  • Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.
By borrowing funds, the firm incurs a debt that must be paid. But, this debt is paid in small installments over a relatively long period of time. This frees funds for more immediate use in the stock market. For example, suppose a company can afford a new factory but will be left with negligible free cash. In that case, it may be better to finance the factory and spend the cash on hand on inputs, labor, or even hold a significant portion as a reserve against unforeseen circumstances.

The Risk of Financial Leverage

The most obvious and apparent risk of leverage is that if price changes unexpectedly, the leveraged position can lead to severe losses. For example, imagine a hedge fund seeded by $50 worth of investor money. The hedge fund borrows another $50 and buys an asset worth $100, leading to a leverage ratio of 2:1. For the investor, this is neither good nor bad -- until the asset price changes. If the asset price goes up 10 percent, the investor earns $10 on $50 of capital, a net gain of 20 percent, and is very pleased with the increased gains from the leverage. However, if the asset price crashes unexpectedly, say by 30 percent, the investor loses $30 on $50 of capital, suffering a 60 percent loss. In other words, the effect of leverage is to increase the volatility of returns and increase the effects of a price change on the asset to the bottom line while increasing the chance for profit as well.