It has been about a decade now that I have been followed Corning (GLW). Even though I have always liked the company, whenever I took a looked at the stock, it was too expensive for my investment pallet.
When a stock is above my P/B and price/sales tolerance levels, I don't even bother with the P/E. A stock can be cheap even without earnings, but a high P/B and price/sales ratio is a red line for me. You might disagree with this notion, but that is my style. Remember there are many ways to skin a cat and many ways to money in the markets, this is my way.
However, things today have changed. Today Corning is not an expensive stock any more -- at least not by my metrics.
GLW Price / Sales Ratio TTM data by YCharts
GLW Total Current Assets data by YCharts
GLW Revenue Quarterly data by YCharts
GLW Market Cap data by YCharts
Furthermore, Corning currently has a trailing P/E of 11 and a forward P/E of 10.
Also please take note the above two charts, where we see revenue as a function of the stock's price and market cap. If you think of it, Corning has really never been cheaper historically.
I am showing you these charts is to show you that the stock today is not expensive anymore and It is probably the first time in a long time that its valuation is within what I would be willing to pay for.
OK so Corning is very well valued compared to its historic levels and also compared to the market. However, there are many companies today that are cheap - Apple ((AAPL) being one of them - why should someone buy Corning?
One of the reasons is Gorilla Glass. According to the company's CEO, Gorilla Glass is the fastest growing product in Corning's 160 year history. The company recently announced its third generation Gorilla Glass, that is three times more scratch resistant.
Another catalysts is touch computing that I have talked about before. Even though many people think Microsoft's (MSFT) Windows 8 is a flop, I think it's the best product that Microsoft has even launched. See touch computing is trickling up. The revolution started with small devices like smart phones, pushed up to tablets and by next year there will not be a laptop without touch screen capabilities.
But it's more than that, Corning has just about every type of glass for almost any type of application today. Photovoltaic glass, large LCD television ultra thin glass, architectural touch sensitive display glass, thermal durable display touch sensitive glass, appliance glass, automotive touch sensitive glass and more. This video gives you a good idea.
But the best catalysts for earnings growth is the picture below.
The circle in the middle is not a hole, but the next generation Gorilla Glass that incorporates Corning's new anti-reflective and anti-glare technology. Outside the circle is the Gorilla Glass Corning currently sells.
Think of this, you can take your tablet, smartphone or laptop out in the sun with no glare. Personally I think by next year there will not be a single high-end smartphone device that does not have this glass. In fact, I dare to say that consumers in the future will not buy a smartphone unless it has this type of glass. Will the glass make the phone?
Gorilla Glass by itself will be enough to provide above average growth for Corning for many years to come, as more and more of our daily lives evolve around technology and more and more of that technology has to do with touch sensitive devices. According to Corning's CEO, Gorilla Glass revenue (about $1 billion today) can increase 2-3 times over the next several years.
Where to buy?
OK so I have shown you that Corning is currently at a favorable valuation, and the company has some very good catalysts (besides the fact that their current quarter was their best ever), the question is where do you buy the stock?
I have said in the past that fundamental analysis is used to pick what to buy, but technical analysis is best for spotting entry and exit points.
As such, the chart above shows that Corning is in a downward trend. My suggestion is to wait for the stock to break above this trend. The reason is that we don't know how far down the stock might go. Also, we have to take into account overall market conditions that are not exactly favorable today. The market can remain irrational longer than we can remain solvent and the market can mark down stocks more than we can imagine.
So put this stock on your list for now, and if it trades above the downward trend-line or overall market conditions improve, I would be a buyer. I think this is an excellent stock for long term conservative portfolios.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.