These Stocks Can Offer Better Returns Over Corning

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We believe that there are other stocks that are currently better valued than Corning’s stock (NYSE: GLW). Corning’s current price-to-operating income ratio (P/EBIT) of 17x is higher than levels of 16x for EnerSys (NYSE: ENS), 14x for BWX Technologies (NASDAQ: BWXT), and 9x for  Brunswick (NYSE: BC). These stocks have a lower valuation (P/EBIT) compared to Corning, while they have seen better revenue and operating income growth over the recent years. This disconnect between valuation and performance could mean that investors are better off buying ENS, BWXT, and BC vs. GLW stock. More specifically, we arrive at our conclusion by looking at historical trends in revenues, operating income, and P/EBIT for these companies. Our dashboard – Better Bet Than Corning Stock: Pay Less To Get More From Stocks ENS, BWXT, BC – has more details – parts of which are summarized below.

1. Revenue Growth

  • Corning’s Revenue grew at an average rate of 3.9% over the last two years, as compared to average revenue growth of 5.1% for EnerSys, 8.0% for BWX Technologies, and 4.6% for Brunswick.
  • However, if we look at the revenue growth over the last twelve month period, Corning’s revenue growth of 22.8% is much better than <3% growth for EnerSys and BWX Technologies, but lower than a large 40% growth for Brunswick.
  • Corning over the recent quarters has seen its revenue expand due to continued demand for gasoline particulate filters, given the increased adoption of the emission regulations in Europe and China.
  • However, with chip shortages impacting overall automobile production, Corning’s automotive business may see slower growth in the near term.
  • Corning’s other businesses, primarily optical fiber, is expected to see strong demand to support 5G expansion for large carriers.
  • Note that Brunswick – a marine recreation company – saw its business expand during the pandemic with boats turning out to be an attractive option for people looking to venture out of their homes, and avoid crowded places.
  • As we look forward, Corning is expected to post over 22% revenue growth in 2021, better than around 10% growth expected for EnerSys and around 1% for BWX Technologies, but lower than over 33% growth forecast for Brunswick.
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2. Operating Income Growth

  • Corning’s Operating Income growth has averaged -18.2% over the last two years, compared to -6.1% for EnerSys, 8.4% for BWX Technologies, and 65% for Brunswick.
  • Corning’s negative growth can largely be attributed to lower sales and higher operating costs during the pandemic.
  • If we look at operating margin growth for the last twelve month period, Corning’s operating margin growth of 279% is much better than 28% for EnerSys and -7.2% for BWX Technologies, but lower than 588% for Brunswick.
  • The surge in Corning’s margins over the last twelve month period can be attributed to a rebound in its business from the lows it saw during the pandemic.
  • Brunswick has seen a large 39% top-line growth so far this year, and it has been able to increase its pricing, which has translated into over 300 bps rise in operating margins over the first three quarters of this year.

The Net of It All

As we can see over the last two years, EnerSys, BWX Technologies, and Brunswick have posted higher revenue growth and operating income growth compared to Corning. Despite better profit and revenue growth over the recent years, these companies have a comparatively lower P/EBIT. Now, Corning’s financials have surely improved over the recent quarters, but it trades at an expensive valuation compared to the other three companies. Overall, we think this gap in valuation will eventually narrow over time to favor the group of more attractively priced names, including Brunswick.

Also Corning’s Peer Comparisons summarizes how the company fares against peers on metrics that matter.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

 Returns Dec 2021
MTD [1]
2021
YTD [1]
2017-21
Total [2]
 GLW Return -2% 4% 55%
 S&P 500 Return 0% 24% 109%
 Trefis MS Portfolio Return 0% 44% 288%

[1] Month-to-date and year-to-date as of 12/10/2021
[2] Cumulative total returns since 2017

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