Today we're going to take a closer look at large-cap Industrials company Corning, whose shares are currently trading at $31.81. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
Trades Below Its Graham Number but Has an Elevated P/E Ratio:
Corning Incorporated engages in the display technologies, optical communications, environmental technologies, specialty materials, and life sciences businesses worldwide. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 22.19 and an average price to book (P/B) ratio of 4.06. In contrast, Corning has a trailing 12 month P/E ratio of 46.8 and a P/B ratio of 2.26.
Corning's PEG ratio is 2.4, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
The Company's Revenues Are Declining:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $11,290 | $11,503 | $11,303 | $14,082 | $14,189 | $13,000 |
| Revenue Growth | n/a | 1.89% | -1.74% | 24.59% | 0.76% | -8.38% |
| Gross Margins | 40% | 35% | 31% | 36% | 32% | 30% |
| Operating Margins | 14% | 11% | 5% | 15% | 10% | 7% |
| Net Margins | 9% | 8% | 5% | 14% | 9% | 4% |
| Net Income (MM) | $1,066 | $960 | $512 | $1,906 | $1,316 | $585 |
| Net Interest Expense (MM) | $191 | $221 | $276 | $300 | $292 | $315 |
| Depreciation & Amort. (MM) | $1,199 | $1,390 | $1,399 | $129 | $123 | $123 |
| Earnings Per Share | $1.13 | $1.07 | $0.54 | $1.28 | $1.54 | $0.68 |
| EPS Growth | n/a | -5.31% | -49.53% | 137.04% | 20.31% | -55.84% |
| Diluted Shares (MM) | 941 | 899 | 772 | 844 | 857 | 859 |
| Free Cash Flow (MM) | $677 | $53 | $803 | $1,775 | $1,011 | $395 |
| Capital Expenditures (MM) | $2,242 | $1,978 | $1,377 | $1,637 | $1,604 | $1,514 |
| Current Ratio | 2.12 | 2.12 | 2.12 | 1.59 | 1.44 | 1.7 |
| Total Debt (MM) | $5,998 | $7,740 | $7,972 | $7,044 | $6,911 | $7,507 |
| Net Debt / EBITDA | 1.31 | 1.97 | 2.78 | 2.18 | 3.36 | 5.75 |
Corning suffers from weak revenue growth and decreasing reinvestment in the business, slimmer gross margins than its peers, and weak operating margins with a negative growth trend. The firm's financial statements also exhibit declining EPS growth and a highly leveraged balance sheet. On the other hand, the company benefits from generally positive cash flows and a decent current ratio of 1.7.
