Reviewing Encore Wire (WIRE) and Kaiser Aluminum (KALU)

Kaiser Aluminum (NASDAQ: KALU) and Encore Wire (NASDAQ:WIRE) are both small-cap industrial products companies, but which is the better business? We will compare the two companies based on the strength of their profitability, analyst recommendations, dividends, earnings, risk, valuation and institutional ownership.

Profitability

This table compares Kaiser Aluminum and Encore Wire’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kaiser Aluminum 2.45% 11.60% 6.32%
Encore Wire 5.50% 8.34% 7.25%

Institutional & Insider Ownership

88.6% of Encore Wire shares are owned by institutional investors. 3.2% of Kaiser Aluminum shares are owned by insiders. Comparatively, 3.8% of Encore Wire shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Kaiser Aluminum and Encore Wire’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Kaiser Aluminum $1.40 billion 1.28 $45.40 million $5.09 20.93
Encore Wire $1.16 billion 0.86 $67.01 million $2.61 18.45

Encore Wire has lower revenue, but higher earnings than Kaiser Aluminum. Encore Wire is trading at a lower price-to-earnings ratio than Kaiser Aluminum, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Kaiser Aluminum has a beta of 0.62, indicating that its stock price is 38% less volatile than the S&P 500. Comparatively, Encore Wire has a beta of 2.03, indicating that its stock price is 103% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and recommmendations for Kaiser Aluminum and Encore Wire, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kaiser Aluminum 1 5 0 0 1.83
Encore Wire 0 0 2 0 3.00

Kaiser Aluminum currently has a consensus target price of $99.83, suggesting a potential downside of 6.28%. Encore Wire has a consensus target price of $56.00, suggesting a potential upside of 16.30%. Given Encore Wire’s stronger consensus rating and higher probable upside, analysts plainly believe Encore Wire is more favorable than Kaiser Aluminum.

Dividends

Kaiser Aluminum pays an annual dividend of $2.20 per share and has a dividend yield of 2.1%. Encore Wire pays an annual dividend of $0.08 per share and has a dividend yield of 0.2%. Kaiser Aluminum pays out 43.2% of its earnings in the form of a dividend. Encore Wire pays out 3.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Summary

Encore Wire beats Kaiser Aluminum on 10 of the 16 factors compared between the two stocks.

Kaiser Aluminum Company Profile

Kaiser Aluminum Corporation manufactures and sells semi-fabricated specialty aluminum mill products. The company offers rolled, extruded, and drawn aluminum products used principally for aerospace and defense, automotive, consumer durables, electronics, electrical, and machinery and equipment applications. Its aerospace and high strength products include heat treat plates and sheets, hard alloy extruded shapes, cold finish rods and bars, seamless drawn tubes, and billets for aerospace and defense industries. The company's automotive extrusions include extruded aluminum products for structural components, bumper systems, anti-lock braking systems, and drawn tubes for drive shafts in the automobile industry. Its general engineering products comprise alloy plate, sheet, rod, bar, tube, wire, and standard extrusion shapes used in various applications, including the production of military vehicles, ordnances, semiconductor manufacturing cells, electronic devices, after-market motor sport parts, tooling plates, parts for machinery and equipment, bolts, screws, nails, and rivets. The company also offers extruded, drawn, and cast billet aluminum products for industrial end uses. It sells its products directly to customers through sales personnel located in the United States, Canada, Europe, and China, as well as through independent sales agents in other regions of Asia, Latin America, and the Middle East. Kaiser Aluminum Corporation was founded in 1946 and is headquartered in Foothill Ranch, California.

Encore Wire Company Profile

Encore Wire Corporation manufactures and sells electrical building wire and cable products for interior electrical wiring in the United States. Its products include NM-B cable for use as interior wiring in homes, apartments, and manufactured housing; THHN/THWN-2, metal-clad, and armored cables for use primarily as wiring in commercial and industrial buildings; UF-B cables; XHHW-2 cables; RHH/RHW-2 cables; and other types of wire products. The company markets its products primarily through independent manufacturers' representatives to wholesale electrical distributors. Encore Wire Corporation was founded in 1989 and is headquartered in McKinney, Texas.

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