Company Profile (obtained from Marketwatch): Corning, Inc. develops and manufactures specialty glass and ceramics. The company provides glass for notebook computers, flat panel desktop monitors, LCD televisions, and other information display applications; optical fiber and cable and hardware and equipment products for the telecommunications industry; ceramic substrates for gasoline and diesel engines in automotive and heavy duty vehicle markets; laboratory products for the scientific community and specialized polymer products for biotechnology applications; advanced optical materials for the semiconductor industry and the scientific community; and other technologies. It operates through through the following business segments: Display Technologies, Optical Communications, Environmental Technologies, Specialty Materials and Life Sciences. The Display Technologies segment manufactures glass substrates for active matrix liquid crystal displays which are used primarily in notebook computers, flat panel desktop monitors, and LCD televisions. The Optical Communications segment manufactures optical fiber and cable, and hardware and equipment to being a comprehensive provider of industry-leading optical solutions across the broader communications industry pioneer optical fiber, cable and connectivity solutions. The Environmental Technologies segment manufactures ceramic substrates and filter products for emissions control in mobile and stationary applications around the world. The Specialty Materials segment manufactures products that provide more than 150 material formulations for glass, glass ceramics and fluoride crystals to meet demand for unique customer needs. The Life Sciences segment develops, manufactures and supplies scientific laboratory products. Corning was founded by Amory Houghton Sr. in 1851 and is headquartered in Corning, NY.
Downloadable PDF version of this valuation:
ModernGraham Valuation of GLW – February 2018
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
What kind of Intelligent Investor are you?
| Defensive Investor; must pass 6 out of the following 7 tests. | ||||
| 1. Adequate Size of the Enterprise | Market Cap > $2Bil | $24,934,736,664 | Pass | |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | 2.75 | Pass | |
| 3. Earnings Stability | Positive EPS for 10 years prior | Fail | ||
| 4. Dividend Record | Dividend Payments for 10 years prior | Pass | ||
| 5. Earnings Growth | Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end | -21.66% | Fail | |
| 6. Moderate PEmg Ratio | PEmg < 20 | 23.29 | Fail | |
| 7. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 1.60 | Pass | |
| Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor. | ||||
| 1. Sufficiently Strong Financial Condition | Current Ratio > 1.5 | 2.75 | Pass | |
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | 0.85 | Pass | |
| 3. Earnings Stability | Positive EPS for 5 years prior | Fail | ||
| 4. Dividend Record | Currently Pays Dividend | Pass | ||
| 5. Earnings Growth | EPSmg greater than 5 years ago | Fail | ||
Stage 2: Determination of Intrinsic Value
| EPSmg | $1.25 |
| MG Growth Estimate | -2.83% |
| MG Value | $3.54 |
| Opinion | Overvalued |
| MG Grade | D+ |
| MG Value based on 3% Growth | $18.11 |
| MG Value based on 0% Growth | $10.61 |
| Market Implied Growth Rate | 7.39% |
| Current Price | $29.08 |
| % of Intrinsic Value | 821.42% |
Corning Incorporated does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.
As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.54 in 2014 to an estimated $1.25 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.39% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.
At the time of valuation, further research into Corning Incorporated revealed the company was trading above its Graham Number of $23.56. The company pays a dividend of $0.62 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 23.29, which was below the industry average of 25.98, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.43.
Corning Incorporated scores quite poorly in the ModernGraham grading system, with an overall grade of D+.
Stage 3: Information for Further Research
| Net Current Asset Value (NCAV) | -$3.43 |
| Graham Number | $23.56 |
| PEmg | 23.29 |
| Current Ratio | 2.75 |
| PB Ratio | 1.60 |
| Current Dividend | $0.62 |
| Dividend Yield | 2.13% |
| Number of Consecutive Years of Dividend Growth | 7 |
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| ModernGraham tagged articles | Morningstar |
| Google Finance | MSN Money |
| Yahoo Finance | Seeking Alpha |
| GuruFocus | SEC Filings |
Most Recent Balance Sheet Figures
| Balance Sheet Information | 12/1/2017 |
| Total Current Assets | $8,827,000,000 |
| Total Current Liabilities | $3,209,000,000 |
| Long-Term Debt | $4,749,000,000 |
| Total Assets | $27,494,000,000 |
| Intangible Assets | $2,563,000,000 |
| Total Liabilities | $11,796,000,000 |
| Shares Outstanding (Diluted Average) | 865,000,000 |
Earnings Per Share History
| EPS History | |
| Next Fiscal Year Estimate | $1.59 |
| Dec2017 | -$0.66 |
| Dec2016 | $3.23 |
| Dec2015 | $1.00 |
| Dec2014 | $1.73 |
| Dec2013 | $1.34 |
| Dec2012 | $1.09 |
| Dec2011 | $1.78 |
| Dec2010 | $2.25 |
| Dec2009 | $1.28 |
| Dec2008 | $3.32 |
| Dec2007 | $1.34 |
| Dec2006 | $1.16 |
| Dec2005 | $0.38 |
| Dec2004 | -$1.61 |
| Dec2003 | -$0.22 |
| Dec2002 | -$1.39 |
| Dec2001 | -$5.89 |
| Dec2000 | $0.49 |
| Dec1999 | $0.66 |
| Dec1998 | $0.56 |
Earnings Per Share – ModernGraham History
| EPSmg History | |
| Next Fiscal Year Estimate | $1.25 |
| Dec2017 | $1.16 |
| Dec2016 | $1.94 |
| Dec2015 | $1.33 |
| Dec2014 | $1.54 |
| Dec2013 | $1.48 |
| Dec2012 | $1.68 |
| Dec2011 | $1.98 |
| Dec2010 | $2.01 |
| Dec2009 | $1.76 |
| Dec2008 | $1.64 |
| Dec2007 | $0.60 |
| Dec2006 | $0.04 |
| Dec2005 | -$0.92 |
| Dec2004 | -$1.63 |
| Dec2003 | -$1.51 |
| Dec2002 | -$1.81 |
Recommended Reading:
Other ModernGraham posts about the company
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Disclaimer:
The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours. See my current holdings here. This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions. ModernGraham is not affiliated with the company in any manner. Please be sure to review our detailed disclaimer.
