Houston Wire & Cable Discounted

Houston Wire & Cable Company (HWCC - Snapshot Report) reported first quarter EPS of $0.37, above our estimate of $0.33 and the year-ago level of $0.35, due to the impact of share repurchases. Sales continue to grow from HWCC's continuous penetration in its target markets in the Utility, Infrastructure and Industrial Sectors.

Given its investment in expanding the sales force, the private label business and the penetration of three key end markets off a smaller sales base than its peers, we believe HWCC can grow faster than the industry. In the near term, though, we expect the 2008 sales growth rate to decelerate compared to 2007 and the company's long-term growth rate in light of a weaker U.S. economy. Our price target is $21.00, based on about 12.4x our 2008 EPS estimate.

The company has been able to generate strong growth primarily from the successful implementation of its five major growth strategies. The company's long-term sales growth target is 10%-15% and its long-term earnings growth target is 15%-20%. One of these strategies is focusing on efficient operations and cost control, which has allowed the company to improve its operating leverage and margins.

At its current price of $20.27 per share, HWCC is trading at approximately 12.0x our 2008 EPS estimate of $1.69, which is at a discount to the industry median multiple and its average peer group multiple. We do not expect a large expansion in the P/E multiple at this time. At a forward P/E multiple of about 12.4x our 2008 EPS estimate, our price target is $21.00 per share.

Read the full analyst report on HWCC