So if there are no financial risks to the firm presently, what do the valuations look like? Assessing WIRE's Pricing Attractiveness Perfect scores all round, and to double check I'm not seeing things differently to the experts, this analysis backed by an Altman Z score of 12.75. There's no debt to speak of and the balance sheet is plump, margins are phenomenal, all short term obligations are covered 8.5 times over, the dividend is tiny hence it is well-covered and the 3Y outlooks are for continued exceptional growth. The really odd thing about WIRE is there are no red-flags in any of these items. We'll start by breaking down the basics of WIRE's financial health and carefully consider all aspects of the balance sheet. ![]() (The "All US Stocks" list referred to in this article can be found on this Seeking Alpha screener) WIRE's Base Financial Health (Data & prices correct as of pre-market 5th November, 2022) ![]() We'll compare WIRE to the full list of the "All US Stocks" Seeking Alpha screener to find out what is going on here. So there's only one thing we can do to decode this tantalizing situation: let's break down the firm's financial health to give us a base rating of the firm's sustainability, give it a valuation attractiveness score, attempt to find a pricing mechanism for the firm and finally discuss some of the major risks investors would need to consider. What we see is the build-up of when an immovable object meets an unstoppable force, and the fireworks are about to begin! We're talking about Encore Wire Corporation ( NASDAQ: WIRE), and below you'll see a graph I concocted thanks to short interest data from NASDAQ and closing prices of the ticker on those days, and what's immediately evident is the rising short interest over the past 12 months despite the relatively stable share price. This is information asymmetry at play, but who is right? So it both excites, yet concerns me, when I see a stock with perfect financial health, solid growth prospects and very attractive valuation metrics begin to see short-sellers pile on. Thanks to short-selling reports and trading volume reports, we can see how others in the market view the stock based on the size and frequency of trades, or the volume of short-sold securities. Investors have an advantage in their corner when assessing information asymmetry, as we can see when another party feels that they hold more information than the market. If one party holds more information than the other, they enjoy an advantage in their negotiation over the other party. It's a term used to represent the imbalance of information between two parties while negotiating or considering a transaction. 'Information Asymmetry' is a term investors should be very familiar with, as it theoretically underpins the very essence of how traders of stocks are able to make money.
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