Corning, Inc. (GLW)

(21 February 2017)

GLW Business Summary

GLW, once an old-line housewares company, is now a leading maker of glass substrates used by the electronics industry and fiber optic equipment used by the telecommunications industry

GLW Fundamentals

  • Price to Earnings: 8.53
  • Earnings Per Share: $3.19
  • Market Cap: 25.7B
  • Current Ratio: 3.29
  • Return on Equity: 20.21%
  • Return on Assets: 12.82%
  • Dividend Yield: 2.22%
  • Price to Sales: 2.73
  • Price to Book: 1.39
  • Price to Free Cash Flow: 45.28

Balance Sheet ($ in Millions)

  • Total Cash increased $470.
  • Total Current Assets increased $569.
  • Total Assets decreased $910.
  • Total Current Liabilities increased $457.
  • Total Liabilities Decreased $1,082.
  • Total Stockholder Equity increased $172.

Income Statement ($ in Millions)

  • Total Revenues decreased $31.
  • Income from Operations decreased $103
  • Net Income increased $1,288.
  • EBITDA increased $2,148.

Cash Flow Statement ($ in Millions)

  • Net Cash provided by operating activities increased $774.
  • Net Cash Provided by Investing Activities increased $12.
  • Net Cash used for financing activities decreased $2,287.
  • Free Cash Flow increased $741.

Highlights from Last 10 Years

  • GLW has used disproportional amounts of cash for investing activities in 2016, while at the same time using a lot of capital for financing activities.
  • Free Cash Flow steadily decreased from 2014 high of $3,633
  • Revenues trending upwards, operating income cyclically trending upwards.
  • Sharp rise in net income in 2016 after two down years in 2014 & 2015.
  • Uptrend in total cash, current assets.
  • Slowdown in the growth of total assets, with a steady increase in total liabilities.

Entry Level: $20 and Below ($15 Ideal)

  • After a dismal 2015, GLW bounced back strong, and its stock reflected it, with gains of 34% in 2016.
  • Due to the run-up in stock valuation, I would hold on buying this until it hits the $20 mark.
  • GLW is currently trading $3 above its 5-year high.
  • However, technically, it is fast approaching it’s 10-year resistance at $28 back in 2008. If it cannot break resistance, I wouldn’t be surprised to see a dip into the low $20s.

Exit Level: $40+

  • Currently Morningstar has GLW at fairly valued, but using a Discounted cash flow method, the stock is undervalued by 18%, putting a fair value at $34.14.
  • I would hold this stock into the high $30s, and if the underlying business is solid, I would sell the profits, and keep the principle in the stock, for the sake of the 2.20% dividend yield.

Research

  • I like GLW, but not at these levels. GLW has a durable competitive advantage within the glass making industry, and is the go to for many companies for glass products.
  • Going on 160 years in the industry, Corning sets the standard for quality, durability, and performance.
  • GLW works in many facets of human development, including: advanced optics, environmental technologies, Gorilla Glass, display glass, life sciences, communication networks, and many more.
  • GLW is branching out into emerging innovative industries such as Automotive, Architecture, and Antimicrobial.
    • Automotive: “Automakers around the world are working to reduce the weight of their vehicles to meet strict mobile emissions regulations. Corning® Gorilla® Glass for Automotive enables a weight reduction in glazing of more than 30% versus conventional soda lime glass. Corning Gorilla Glass for Automotive can be used in all openings of a vehicle including windshields, sidelites, sunroofs and backlites.  Corning Gorilla Glass can also be used in automotive touch/control panels” (http://www.corning.com/worldwide/en/innovation/corning-emerging-innovations.html)
    • Architecture: “Fully customizable, Corning® Gorilla® Glass shows off vibrant colors for striking looks. Light and thin, it’s also a great choice for places with weight restrictions, like elevators” (http://www.corning.com/worldwide/en/innovation/corning-emerging-innovations.html)
    • Antimicrobial: “Formulated to protect touch surfaces from microbes, Antimicrobial Corning® Gorilla® Glass is built to last the lifetime of a device. With the same toughness and optical clarity of Corning® Gorilla® Glass, it can work continuously—during every tap, swipe, and phone call. And it’s the first antimicrobial cover glass to be registered with the United States Environmental Protection Agency” (http://www.corning.com/worldwide/en/innovation/corning-emerging-innovations.html)
  • With enough patience, you can grab this company for under $20 a share. GLW is the kind of company you would want to hold forever, as long as their balance sheets are solid, and management keeps in line with the goals of the company.
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