![]() ![]() Alternatively, email editorial-team (at). Have feedback on this article? Concerned about the content? Get in touch with us directly. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company. That being so, according to the latest industry analyst forecasts, the company's earnings are expected to shrink in the future. Unsurprisingly, this has led to an impressive earnings growth. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. ![]() On the whole, we feel that Encore Wire's performance has been quite good. We reckon that there could probably be other factors that could be driving the forseen decline in the company's ROE. Regardless, the future ROE for Encore Wire is predicted to decline to 16% despite the anticipated decrease in the payout ratio. Our latest analyst data shows that the future payout ratio of the company is expected to drop to 0.4% over the next three years. This shows that the company is committed to sharing profits with its shareholders. Next, on comparing with the industry net income growth, we found that Encore Wire's growth is quite high when compared to the industry average growth of 12% in the same period, which is great to see.īesides, Encore Wire has been paying dividends for at least ten years or more. Under the circumstances, Encore Wire's considerable five year net income growth of 58% was to be expected. Secondly, even when compared to the industry average of 15% the company's ROE is quite impressive. Encore Wire's Earnings Growth And 39% ROEįirstly, we acknowledge that Encore Wire has a significantly high ROE. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Thus far, we have learned that ROE measures how efficiently a company is generating its profits. Why Is ROE Important For Earnings Growth? ![]() So, this means that for every $1 of its shareholder's investments, the company generates a profit of $0.39. The 'return' is the profit over the last twelve months. ![]() So, based on the above formula, the ROE for Encore Wire is:ģ9% = US$718m ÷ US$1.8b (Based on the trailing twelve months to December 2022). Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity ROE can be calculated by using the formula: View our latest analysis for Encore Wire How To Calculate Return On Equity? In short, ROE shows the profit each dollar generates with respect to its shareholder investments. Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Particularly, we will be paying attention to Encore Wire's ROE today. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. Encore Wire (NASDAQ:WIRE) has had a great run on the share market with its stock up by a significant 38% over the last three months. ![]()
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