IT Hardware Stocks

Corning Inc Valuation – January 2019 $GLW

Company Profile (excerpt from Reuters): Corning Incorporated (Corning), incorporated on December 24, 1936, is engaged in manufacturing specialty glass and ceramics. The Company’s segments include Display Technologies, Optical Communications, Environmental Technologies, Specialty Materials, Life Sciences and All Other. The Company provides glass for notebook computers, flat panel desktop monitors, liquid crystal display (LCD) televisions, and other information display applications; carrier network and enterprise network 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; optical materials for the semiconductor industry and the scientific community, and other technologies. As of December 31, 2016, the Company had manufactured products at 98 plants in 17 countries.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GLW – January 2019

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 $23,803,872,024 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.13 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 -27.31% Fail
6. Moderate PEmg Ratio PEmg < 20 25.88 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.98 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 2.13 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.44 Fail
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 $1.15
MG Growth Estimate -3.81%
MG Value $1.02
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $16.66
MG Value based on 0% Growth $9.76
Market Implied Growth Rate 8.70%
Current Price $29.76
% of Intrinsic Value 2923.15%

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 level of debt relative to the net current assets, and 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 $1.15 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.7% 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 $21.29. 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 25.91, which was below the industry average of 33.25, 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 $-6.22.

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) -$6.22
Graham Number $21.29
PEmg 25.91
Current Ratio 2.13
PB Ratio 1.98
Current Dividend $0.62
Dividend Yield 2.08%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $6,632,000,000
Total Current Liabilities $3,112,000,000
Long-Term Debt $5,056,000,000
Total Assets $26,392,000,000
Intangible Assets $3,239,000,000
Total Liabilities $12,414,000,000
Shares Outstanding (Diluted Average) 930,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.29
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 $0.22
Dec1998 $0.19

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.15
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 -$1.54
Dec2002 -$1.89

Recommended Reading:

Other ModernGraham posts about the company

Corning Inc Valuation – February 2018 $GLW
Corning Inc Valuation – May 2016 $GLW
Corning Inc Valuation – November 2015 Update $GLW
Corning Inc. Analysis – August 2015 Update $GLW
30 Companies in the Spotlight This Week – 5/23/15

Other ModernGraham posts about related companies

HP Inc Valuation – December 2018 $HPQ
Intel Corp Valuation – November 2018 $INTC
Apple Inc Valuation – November 2018 $AAPL
Littelfuse Inc Valuation – September 2018 $LFUS
CTS Corporation Valuation – August 2018 $CTS
Kopin Corp Valuation – August 2018 $KOPN
Knowles Corp Valuation – August 2018 $KN
Cree Inc Valuation – August 2018 $CREE
Cray Inc Valuation – August 2018 $CRAY
Kulicke & Soffa Industries Inc Valuation – August 2018 $KLIC

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.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back To Top