Corning (GLW)'s Hidden Bargain: An In-Depth Look at the 25% Margin of Safety Based on its Valuation
On October 24, 2023, Corning Inc (NYSE:GLW) experienced a daily loss of 5.05%, contributing to a 3-month loss of 22.87%. Despite these losses, the company has maintained an Earnings Per Share (EPS) (EPS) of 0.73. The question arises: is Corning (NYSE:GLW) significantly undervalued? This article offers a comprehensive valuation analysis of Corning, inviting readers to delve deeper into the financial details of the company.
Company Introduction
As a leader in materials science, Corning Inc (NYSE:GLW) specializes in the production of glass, ceramics, and optical fiber. With a broad application range from flat-panel displays in televisions to gasoline particulate filters in automobiles, Corning holds a leading share in many of its end markets. Despite its current stock price of $25.57, the estimated fair value (GF Value) of the company stands at $36.32, suggesting a potential undervaluation.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of the business performance. The GF Value Line on our summary page provides an overview of the fair value at which the stock should be traded.
Corning (NYSE:GLW) stock appears to be significantly undervalued according to the GF Value calculation. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
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Assessing Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, investors must review a company's financial strength before deciding to purchase shares. Corning's cash-to-debt ratio of 0.18, which ranks worse than 89.57% of 2369 companies in the Hardware industry, suggests a fair financial strength of 5 out of 10.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. Corning has been profitable 9 over the past 10 years, with an operating margin of 7.17%, ranking better than 65.35% of 2450 companies in the Hardware industry. This indicates strong profitability.
However, growth is a crucial factor in the valuation of a company. Corning's 3-year average revenue growth rate is better than 63.36% of companies in the Hardware industry, but its 3-year average EBITDA growth rate of 8.1% ranks worse than 55.19% of companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is another way to evaluate its profitability. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Corning's ROIC was 2.92, while its WACC came in at 8.88.
Conclusion
Overall, Corning (NYSE:GLW) stock appears to be significantly undervalued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks worse than 55.19% of 1957 companies in the Hardware industry. For more about Corning stock, check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
