In a commodity market as competitive as the one for copper wire, pricing is often a key component of being profitable. On Monday, industrial copper wire supplier Encore Wire (NASDAQ:WIRE) reported third-quarter results that underscore just how profitable that market can be.

For the quarter ending Sept. 30, the company reported record sales of $207.5 million, a 31% increase over last year, while profits soared 75%, to $11.2 million, or $0.48 a share. Those numbers easily beat the Street's forecasts of $176 million in sales and earnings of just $0.18. The stock surged 7% in regular trading and an additional 15% after hours.

Encore has established itself as the low-cost supplier of choice for residential and commercial wiring wholesalers. It supplies 60% of the top 200 wholesale electrical distributors in America. The company, like competitors General Cable (NYSE:BGC) and Superior Essex (NASDAQ:SPSX), sells its products at prices in accordance with the price of copper, which is what permits it to expand its margins. Copper prices have been rising steadily since last year, and the wire maker has been able to pass along those increases to customers, thus expanding its profit margins.

Year over year, shipment volume -- the amount of copper pounds of wire sold -- remained relatively flat. Reflecting the uptick in the copper market, however, sequential shipment volume rose by 6% from the second quarter. The company was able to notch record sales and profits because the price of copper had risen, and gross margins increased to nearly 15% from 13.7% last year. At the same time, in accordance with being the low-cost producer, Encore was able to reduce its operating expenses as a percentage of revenue from 7% last year down to 6.2% this quarter.

Encore Wire was a special recommendation of Motley Fool Hidden Gems. The company owns 25% of the copper wire market and produces a run rate of owner's earnings approaching $20 million, useful for paying down the substantial long-term debt that it's necessarily required to have.

Small-cap gems like Encore sometimes take a while to develop, needing the catalyst for a story to evolve. For this leading copper wire producer, that catalyst was the increase in raw-material prices and its simultaneous ability to maintain control over its costs. That combination has Encore wired for sound.

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Fool contributor Rich Duprey owns shares of Encore Wire but none of the other stocks mentioned in this article. The Motley Fool has a disclosure policy.